US Dollar Index (DXY) News: Market Eyes Fed’s Next Move – Dollar’s Fate at Stake

Dollar Gains Ahead of Powell’s Speech; Euro and Gold Retreat

The U.S. dollar traded higher on Thursday, recovering some ground but remaining near its lowest levels in over a year against the euro and sterling. This rebound comes as traders position themselves ahead of Federal Reserve Chairman Jerome Powell’s highly anticipated speech at the Jackson Hole symposium on Friday. Despite the dollar’s uptick, underlying pressures remain from dovish signals by the Federal Reserve and fresh signs of a weakening U.S. labor market, which support expectations of an imminent rate cut.

At 13:55 GMT, the U.S. Dollar Index is trading 101.470, up 0.334 or +0.33%.

Treasury Yields Climb as Markets Await Powell

Yields on U.S. Treasury notes rose on Thursday, with the 10-year yield advancing by over 6 basis points to 3.839% and the 2-year yield increasing to 3.98%. Investors are keenly awaiting Powell’s remarks, which follow the release of the Fed’s July meeting minutes. These minutes indicated that most Fed officials favored an interest rate cut if economic data aligns with expectations. Currently, markets are pricing in a 66% probability of a 25-basis-point rate cut in September, and a 34% chance of a 50-basis-point reduction.

Euro and Sterling Show Strength Despite Dollar’s Recovery

The euro and sterling displayed resilience, with the euro trading at $1.1134, slightly off its peak from Wednesday, and sterling hovering at $1.3112. The dollar’s recovery against the yen, rising 0.4% to 145.90 yen, reflects continued market uncertainty over Japan’s monetary policy, especially with Bank of Japan Governor Kazuo Ueda set to testify on Friday. Traders are closely monitoring Ueda’s testimony for further guidance following the BOJ’s unexpected rate hike.

Gold Eases from Record Highs as Dollar Rebounds

Gold prices edged lower on Thursday as the dollar strengthened. Spot gold dipped 0.2% to $2,507.32 per ounce, down from its record high earlier in the week. Investors are cautiously positioning themselves ahead of Powell’s speech, with some expecting a near-term consolidation in gold prices, particularly after its recent surge above $2,500. Analysts suggest that the future path of gold will largely depend on Fed policy signals from Jackson Hole.

Market Forecast: Dollar’s Near-Term Outlook Hinges on Fed Guidance

The U.S. dollar’s near-term trend will be heavily influenced by Powell’s comments at Jackson Hole. If Powell hints at a more aggressive rate-cutting cycle, the dollar may weaken further, particularly against the euro and yen. Conversely, a measured approach could provide temporary support for the greenback. Gold prices, meanwhile, may consolidate within the $2,450-$2,500 range, awaiting clearer signals from the Fed’s policy direction.