Dollar Strengthens, Powell Holds Back on Cut Signals
The dollar index rose above 97.3 on Wednesday, snapping a two-day losing streak. The gains came after Fed Chairman Jerome Powell struck a cautious tone regarding further policy easing. He emphasized that the path to interest rate cuts remains uncertain as the central bank must balance controlling inflation with a weakening job market.
Powell also assessed that the impact of tariffs on prices has so far been on the lower side of expectations, leaving room for less stringent policy if needed. Meanwhile, new Fed Chairman Stephen Miran—who pushed for a 50-bps cut at last week's meeting—warned of the risk of the Fed underestimating the pace of tightening, threatening jobs if it doesn't act more boldly.
For the market, the key message: the Fed remains data-dependent. That's why focus is now shifting to the release of the PCE index—the Fed's favorite inflation measure—for additional signals on interest rates. A softer PCE reading could put further pressure on the dollar, while a stronger reading could extend the greenback's rally.
Tactically, a strengthening dollar is pressuring riskier assets and interest-rate-sensitive commodities, while US bond yields are likely supported by expectations of more cautious policy. Investors are still awaiting confirmation from subsequent macro data before increasing their positions in the direction of the new trend.
Source: Newsmaker.id
