US Dollar Index (DXY) News: Greenback Dips as Treasury Yields Slide, Traders Eye Powell’s Speech

Dollar Weakens as Treasury Yields Dip, Gold Hits Record High

The U.S. dollar hit a fresh seven-month low on Tuesday, pressured by declining Treasury yields and a surge in the euro, as traders anticipate Federal Reserve Chair Jerome Powell’s speech on Friday at the Jackson Hole symposium. The speech is expected to provide crucial insights into the Fed’s approach to monetary policy and the potential for rate cuts this year.

At 13:53 GMT, the U.S. Dollar Index (DXY) is trading 101.662, down 0.188 or -1.18%.

Treasury Yields Hold Steady, Dollar Slips

U.S. Treasury yields remained relatively unchanged on Monday, with the 10-year yield at 3.877%, down 1 basis point, and the 2-year yield slightly lower at 4.061%. This stability comes ahead of the release of the Federal Reserve’s July meeting minutes and Powell’s upcoming remarks at Jackson Hole, which are expected to influence market sentiment. Despite last week’s better-than-expected retail sales and jobless claims data, concerns about the U.S. economy’s health persist, keeping global markets on edge.

Euro Strengthens, Dollar Index Falls

The euro reached $1.1087 on Tuesday, its highest level since late December, contributing to the dollar index’s decline to 101.82, the lowest since early January. Market participants are fully pricing in a Fed rate cut in September, with a 26.5% probability of a 50 basis-point reduction, as indicated by CME Group’s FedWatch Tool. Analysts suggest that the outcome of the Jackson Hole conference could be decisive in determining the extent of rate cuts this year, with the Fed potentially signaling a smaller cut than some investors expect.

Gold Surges on Weaker Dollar, Western Demand

Gold prices surged to a record high of $2,524.88 per ounce on Tuesday, driven by the weaker dollar and increased buying from Western investors. This marks a continuation of gold’s strong performance this year, with prices up 22% year-to-date. Analysts note that gold’s rally is primarily influenced by currency movements rather than interest rates at this stage. Despite some downside risks, such as the approaching “overbought” zone on the Relative Strength Index, the structural backdrop for gold remains positive.

Market Forecast

Looking ahead, the dollar is likely to remain under pressure as traders await Powell’s speech, with the potential for further declines if the Fed signals a more dovish stance. Gold could continue its upward trajectory, supported by ongoing demand and a weakening dollar. However, any surprises in the Fed’s communication could lead to increased volatility across currency and commodity markets.

Technical Analysis

The US Dollar Index (DXY) is currently in a free fall, while testing its lowest level since January. This puts it in a position to challenge last year’s close at 101.333, followed by a major bottom at 100.617.