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Dollar index steadies near 99 ahead of US PCE inflation data

Markets have cut their odds of a September Fed rate hike, with CME FedWatch pricing nearly a 38.4% probability for 25 bps.

Reported · Written up by our desk · Major Pairs

The US Dollar Index, or DXY, traded around 99.0 in early European hours Wednesday, recovering some losses but still vulnerable as traders weigh shifting expectations for US rates and Treasury yield pressures, according to FXStreet.

FXStreet notes that renewed focus on longer-dated Treasury borrowing costs follows a plan for the US Treasury to double bond buyback operations to at least $4 billion per operation, up from a current $2 billion maximum. At the same time, the dollar faced risks from a confluence of factors through the rest of the year.

Beyond US fiscal and Treasury actions, FXStreet points to new secondary sanctions tied to business links with Iran that could lift safe-haven demand for the US dollar. Traders are also watching the Fed for clues on the interest-rate path, with markets pricing nearly a 38.4% probability of a 25 bps rise in September, down from 67% earlier this month.

Wednesday’s main catalyst is the release of the US July Personal Consumption Expenditures price index, while Friday brings Fed Chairman Kevin Warsh’s speech in Jackson Hole. FXStreet reports that any hawkish tone could support near-term dollar strength, while strategists at Scotiabank warned the dollar’s stabilization may be fragile without clearer signals on US fiscal consolidation and the Fed’s reaction function.

Latest closeDollar index 99.64 ▼0.3%

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