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The U.S. Dollar staged a strong comeback during the week ended August 28 amidst hawkish hints from Kevin Warsh at his first speech as Fed Chair at the Jackson Hole symposium. Economic data releases during the week including the sticky PCE-based inflation readings also boosted the dollar.<\/p>\n
During the past week, the U.S. dollar inter alia rallied against the euro, the British pound, the Australian dollar, the Japanese yen, the Swedish krona, the Canadian dollar and the Swiss franc. The 6-currency Dollar Index jumped close to a percent over the course of the week. Here is a quick recap of the dollar’s trajectory during the week ended August 28.<\/p>\n
Data released on Wednesday by the U.S. Bureau of Economic Analysis showed the annual PCE Price Index steady at 3.7 percent and the core component thereof steady at 3.3 percent. The month-on-month PCE price index increased to 0.2 percent from -0.1 percent in June while the core component thereof increased to 0.2 percent from 0.1 percent in June.<\/p>\n
GDP data released by the U.S. Bureau of Economic Analysis on the same day showed that in the second quarter, the U.S. economy<\/span> expanded at an annualized rate of 1.5 percent. Despite the decline from 2.1 percent in the previous quarter, the readings matched the preliminary estimate.<\/p>\n The preliminary benchmark revision by the Bureau of Labor Statistics’ released on Friday showed the U.S. economy added 79,000 fewer jobs than previously estimated in the 12 months through March 2026. The downward revision was significantly lower than the revision of 911 thousand recorded in the previous period.<\/p>\n The sticky inflation readings added to rate hike expectations from the Federal Reserve. However, the most decisive influence on the dollar’s trajectory in the past week was the Fed Chair’s comments that underlying inflation trends had not meaningfully improved. In his keynote address at the Jackson Hole symposium, Warsh again asserted that the central bank’s focus should be on delivering price stability.<\/p>\n As markets<\/span> assessed the Fed chair’s focus on inflation combat, rate hike expectations also increased. According to the CME FedWatch tool that tracks the expectations of interest rate traders, the likelihood of a quarter-percentage Fed rate hike in September that stood at 41 percent on August 24 increased to 57 percent on August 28.<\/p>\n During the week, the Dollar Index (DXY), a measure of the Dollar’s strength against a basket of 6 currencies climbed from the low of 98.86 recorded on Monday to the two-week high of 99.73 recorded on Friday. Bolstered by the jump in Fed rate hike bets, the Dollar Index which had closed at 98.80 on August 21, finished trading at 99.70 a week later. The index added 0.91 percent during the week ended August 28.<\/p>\n As Fed rate hike fears boosted the greenback, the EUR\/USD pair plunged 0.80 percent in a week. By the end of the week on August 28, the EUR\/USD pair dropped to 1.1585, from 1.1679 a week earlier. The pair ranged between a weekly high of 1.1688 recorded on Monday and a weekly low of 1.1578, recorded on Friday. The week also witnessed minutes of the European Central Bank’s meeting in July showing all policy makers unanimously supporting the pause on rates. The policy makers considering a pause as appropriate amidst the elevated economic uncertainty and the transmission of the energy price shock, added to the pressure on the euro.<\/p>\n The week ended August 28 also witnessed the pound dropping almost a percent against the dollar amidst renewed Fed rate hike expectations. The sterling, which had closed at $1.3634 on August 21 declined to $1.3535 by August 28. The GBP\/USD pair traded between a high of 1.3660 touched on Monday and a low of 1.3526, recorded on Friday.<\/p>\n Amidst the Dollar’s resurgence, the Aussie slipped 0.14 percent against the U.S. Dollar during the week ended August 28. The AUD\/USD slipped from 0.7172 on August 21 to 0.7162 on August 28. The pair traded between the week’s low of 0.7137 recorded on Tuesday and the week’s high of 0.7209 recorded on Friday. Data released on Tuesday showed Australia’s annual inflation declining to 3.5 percent in July from 3.8 percent in the previous month.<\/p>\n The Japanese yen also dropped 0.70 percent against the U.S. dollar during the week ended August 28. Data released on Thursday showed Japan’s unemployment rate unexpectedly declining in July. The USD\/JPY pair which had closed at 158.95 on August 21, rose to 160.07 in a week’s time. During the week, the pair ranged between 158.61 touched on Monday and 160.21 recorded on Friday.<\/p>\n Sentiment towards the U.S. dollar in the currency market mellowed slightly on Monday despite the fresh escalation in U.S.-Iran tensions and the jump in crude oil prices. After Friday’s rebound, the Dollar Index has retreated on Monday, trading between 99.47 and 99.64. The index is currently trading 0.17 percent lower at 99.53 versus 99.70 at close on Friday.<\/p>\n Key economic data releases including PMI, Job Openings, Non-farm payrolls as well as unemployment position are due from the U.S during the week. Meanwhile, according to the CME FedWatch tool that tracks the expectations of interest rate traders, the likelihood of a quarter-percentage Fed rate hike in September that stood at 57 percent on Friday has increased to 66 percent.<\/p>\n Ahead of Tuesday’s inflation update, the EUR\/USD pair has rallied 0.16 percent to 1.1602 on Monday from 1.1585 at close on Friday. The GBP\/USD pair has edged up 0.06 percent to 1.3541 from 1.3535 at the end of the previous week.<\/p>\n The AUD\/USD pair which was at 0.7162 at close on Friday has edged up to 0.7163 ahead of the update on second quarter GDP. The USD\/JPY pair has lost 0.19 percent, declining to 159.80 from 160.07 at close on Friday while markets wait for the latest consumer confidence reading on Tuesday. <\/p>\n<\/p>\n Forex News<\/p>\n<\/div>\n