US Dollar Flat, Markets Await Jackson Hole & Fed Independence Issues
The US dollar moved flat on Thursday. Investors awaited policy cues from the Jackson Hole symposium while reassessing concerns about the Fed's independence following Donald Trump's latest comments. The euro and pound barely moved at $1.1652 and $1.3451, respectively, while the yen and Swiss franc weakened slightly.
The probability of a Fed rate cut next month fell slightly to 82%, providing modest support for the dollar. SocGen analyst Kenneth Broux believes the risks are asymmetric: the market reaction would be greater if Powell signals a rate hold rather than a cut—potentially leading to selling in short-dated US Treasuries and a stronger dollar.
Political issues also loom large: Trump urged Fed Chair Lisa Cook to resign and renewed criticism of Powell, sparking concerns about attempts to influence the central bank. Some investors even expect Trump to replace Powell when his term ends in May and nominate Stephen Miran for the vacant Fed seat. However, some analysts believe the impact on near-term policy is minimal, leading to a muted foreign exchange market reaction.
The Dollar Index rose 0.1% to 98.337 and has the potential to rise 0.4% this week. The 10-year US Treasury yield is at 4.30%, and the 2-year yield is at 3.756%. In Northern Europe, the Norwegian krone strengthened after mainland GDP data beat estimates. Bearish bets on the Chinese yuan hit their highest level since mid-May. In crypto, Bitcoin fell 0.6% to $113,741, and Ether fell 1.6% to $4,285.89.
Source: Newsmaker.id
