The strengthening of the US dollar, Bitcoin fluctuating at high levels, and favourable information regarding stablecoin legislation benefit the crypto market.

The US dollar has risen for two consecutive weeks, with interest rate prospects still uncertain

According to Reuters, the US Dollar Index (DXY) has steadily risen this week, reaching 98.456 as of 00:38 Beijing time, with a cumulative increase of 0.64% this week, continuing last week's rise of 0.91%. On Thursday, it briefly rose to 98.951, setting a new high since June 23.

The main factor driving the strengthening of the US dollar is the strong economic data from the United States. Retail sales in June rebounded more than expected, and the number of initial unemployment claims also fell to a three-month low, indicating that consumption and the job market remain resilient. In addition, the CPI data released earlier this week recorded the largest rise in five months, suggesting that tariffs may be starting to impact inflation.

Despite current market expectations that the Federal Reserve will only cut interest rates by about 45 basis points for the remainder of 2025, down from expectations of nearly 50 basis points earlier this week, the dollar has still fallen about 9.3% this year due to large-scale sell-offs triggered by the uncertainty of Trump’s policies during March and April.

Policy uncertainty still poses a threat to the US dollar

Investors remain concerned about the fiscal burden brought by the Trump administration's massive spending and tax cut plans, as well as its public criticism of Federal Reserve Chairman Powell. Earlier this week, the market was shaken by Bloomberg's report that Trump planned to dismiss Powell, although this was later denied.

Analysts at the Commonwealth Bank of Australia pointed out that if U.S. policymakers continue to raise market concerns, the attractiveness of U.S. dollar assets may further decline.

Yen under pressure as US-Japan trade negotiations approach a critical juncture

The USD/JPY exchange rate remains around 148.60, close to the 3 and a half month high of 149.19 set this Wednesday. This week, the USD/JPY has cumulatively pumped 0.73%.

Japan is set to hold its Senate elections this Sunday, and polls indicate that the ruling coalition faces the risk of losing its majority seats, which could lead to increased policy uncertainty and exacerbate the difficulties in trade negotiations with the United States. Japan's trade negotiator Akizawa Yoshinari met with U.S. Secretary of Commerce Howard Lutnick on Thursday, trying to avoid the 25% auto tariff that will take effect on August 1.

Euro and Pound Slightly Rise

The euro against the dollar rose by 0.25% to 1.1626, slightly above the three-week low of 1.1556 reached on Thursday. It has fallen a cumulative 0.59% this week. The pound rose by 0.13% to 1.3436, narrowing its decline this week to 0.41%.

Bitcoin fluctuates at high levels, stablecoin legislation provides support

After Bitcoin reached an all-time high of 123,153.22 USD this week, it is currently fluctuating around 119,899 USD, with a slight rise of 0.35% for the day.

Market sentiment remains optimistic, mainly boosted by the U.S. Congress passing the stablecoin regulatory bill. This bill establishes a legal framework for stablecoins pegged to the U.S. dollar, providing an important compliance foundation for the crypto market and boosting investor confidence.

Conclusion: The short-term performance of the dollar benefits from strong data, but policy uncertainty remains a potential risk. Meanwhile, the crypto market is witnessing positive legislative progress, particularly in the regulation of stablecoins, which is expected to drive long-term demand growth for Bitcoin and mainstream cryptocurrencies.