US Dollar Index posts modest gains above 98.00 ahead of US PMI releases
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades in positive territory near 98.30 during the Asian session on Thursday. The preliminary reading of the US S&P Global Purchasing Managers Index (PMI) reports for August will take center stage later on Thursday.
Traders reduce bets on a rate cut at the Federal Reserve’s (Fed) September meeting after a hotter-than-expected July Producer Price Index (PPI) reading. This, in turn, provides some support to the DXY. Fed fund futures traders are now pricing in an 83% possibility of a Fed rate cut next month, after last week briefly fully pricing in a move, according to the CME FedWatch tool. Traders are pricing in 54 basis points (bps) of reductions by year-end.
Fed officials worried at their July meeting about the condition of the labor market and inflation, though most agreed that it was too soon to lower interest rates, the minutes from the Fed’s July 29-30 meeting showed. Policymakers stated that it would take time to have more clarity on the magnitude and persistence of higher tariffs’ effects on inflation.
The minutes were released two days ahead of a crucial event on Friday. Fed Chair Jerome Powell will deliver his speech during the central bank’s annual symposium at Jackson Hole, Wyoming. His remarks could offer some hints about a short-term direction for the Fed regarding rates as well as a longer-term view on policy.
US President Donald Trump on Wednesday called on Fed Governor Lisa Cook to resign after a staunch ally called for an investigation of the board member’s mortgages. Analysts expect forcing another Fed governor out would create an additional opportunity for Trump to nominate someone who agrees with his push to lower rates. This raised concerns over the Fed’s independence and might undermine the US Dollar.
Source: FXstreet
