The US Dollar Index experienced volatility, rising after hotter-than-expected wholesale inflation data tempered expectations of a more aggressive Federal Reserve rate cut in September. While a 25-basis-point cut remains highly probable, the likelihood of a larger 50-basis-point cut has diminished. Investors are awaiting further economic data releases and the Jackson Hole symposium for additional insights into future monetary policy.
- The Dollar Index hovered above 98.
- It rose about 0.5% after the previous session.
- US wholesale inflation exceeded forecasts, rising 0.9% month-over-month.
- The Producer Price Index climbed 3.3% year-over-year.
- Markets still anticipate a 25-basis-point rate cut next month with over 90% probability.
- Expectations for a 50-basis-point cut have decreased.
- Investors are watching import prices, consumer sentiment, and retail sales.
- The Jackson Hole symposium is expected to provide signals on future policy.
- Despite Thursday’s advance, the dollar index remains on track for a small weekly loss.
The dollar’s performance is being influenced by inflation data and expectations regarding future interest rate decisions. Stronger-than-anticipated inflation reduces the likelihood of more aggressive monetary easing, which can support the dollar’s value. Market participants are closely monitoring upcoming economic releases and central bank communications to gauge the direction of monetary policy and its potential impact on the currency.