Is the Dollar Calm Before the PCE Storm?
The US Dollar Index (DXY) held near 98.3 on Wednesday after weakening in the previous session. Pressure stemmed from renewed concerns about the Federal Reserve's independence and weakening confidence in the dollar's global dominance. Cautious sentiment kept market participants from adding to their positions before the release of key inflation data later this week.
Earlier this week, President Donald Trump announced he would fire Fed Chair Lisa Cook over allegations of mortgage fraud. Cook's office asserted it would pursue legal action to block the dismissal. This unprecedented move sparked debate about the limits of the president's authority over the supposedly independent central bank.
Some analysts believe that if the dismissals continue, the chances of a faster interest rate cut could increase, in line with political pressure to lower borrowing costs. The market currently rates an 87% probability of a 25 bps cut at the Fed's September meeting—a prospect that tends to weigh on the dollar.
Looking ahead, attention is focused on Friday's release of the PCE Price Index, the Fed's favorite inflation measure. A hotter reading could narrow the window for a cut and support the dollar; conversely, a more subdued reading could strengthen rate cut expectations and extend pressure on the greenback. Investors are bracing for volatility ahead of the data. (ayu)
Source: Newsmaker.id
