**Title: US Dollar Strengthens as Market Awaits Powell’s Jackson Hole Speech**
*Originally reported by Mitrade News Team*
*Date: August 26, 2023*
The US dollar (USD) continued its upward trend during the morning Asian trading hours on Friday, driven by optimism surrounding Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole Economic Symposium. With markets interpreting recent US economic data as a sign that further monetary policy tightening remains on the table, investor sentiment is steering in the direction of dollar strength.
This article offers an in-depth look at the factors contributing to the USD’s momentum, including macroeconomic indicators, expectations from Powell’s speech, interest rate outlooks, global market sentiment, and comparative movements in other major global currencies.
## Recent US Dollar Performance
The US dollar index (DXY), which gauges the greenback’s performance against a basket of six major currencies, rose slightly by 0.1% to 103.98. This marks the sixth consecutive week of gains, signaling robust investor confidence in the currency amid expectations that the Federal Reserve will maintain its hawkish stance.
Key highlights include:
– The DXY touched a two-month high earlier in the week, signaling sustained confidence in the greenback.
– The dollar has seen consistent strength against risk-sensitive currencies like the Australian and New Zealand dollars.
– Renewed appetite for the dollar stems from market certainty about US resilience in the face of global economic uncertainty.
## Market Focus: Jackson Hole Symposium
Investors are closely eyeing Jerome Powell’s highly anticipated speech scheduled at 10:05 a.m. ET (14:05 GMT) during the annual Jackson Hole Economic Symposium held in Wyoming. This key event has historically provided deep insights into monetary policy directions not only for the US but also globally.
Expectations from Powell’s speech include:
– Clarity on whether the Federal Reserve sees more interest rate hikes necessary to curb inflation.
– Insights into how policymakers assess recent inflation data and labor market strength.
– Guidance on how long interest rates will remain at elevated levels, a crucial factor for currency and bond markets.
Economists from JPMorgan Chase, Goldman Sachs, and Barclays anticipate that Powell will retain a cautiously hawkish tone given the mixed bag of economic indicators. They expect him to stress a data-dependent strategy moving forward.
## Fed’s Policy Outlook
A key mover for the US dollar is the evolving expectations for US interest rates. Although the Federal Reserve paused rate hikes at its July meeting, inflation remained above the target range, particularly the core PCE inflation metric.
Several factors suggest that Powell may hint at the possibility of another rate increase:
– Labor markets remain tight, with low unemployment and steady job creation.
– Consumer spending is resilient, helping support GDP growth.
– Recent data such as the July retail sales and durable goods orders surprised to the upside.
– Price pressures, though cooling, continue to persist in vital sectors such as housing and services.
According to CME Group’s FedWatch Tool:
– Markets are pricing in a 20% chance of a 25 basis point hike in September.
– There’s a 40% probability of another rate hike before the end of 2023.
– Powell’s speech may either reinforce or scale back these probabilities based on its tone.
## Treasury Yields and Their Impact
Treasury yields have remained volatile but high, reflecting uncertainty about the Fed’s future actions.
– The yield on 10-year US Treasuries briefly hit a 16-year high of 4.36% during the week before easing slightly to 4.24%.
– The 2-year yield, more sensitive to near-term Fed moves, remains elevated around 5%, underlining short-term rate expectations.
Higher yields tend to support the USD by increasing the opportunity cost of holding other currencies, especially those of countries with low or declining interest rates.
## Broader Economic Picture
The US economy continues to outperform many of its peers, particularly in Europe and Asia. This disparity reinforces
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