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Hawkish Warsh lifts dollar, pushing EUR/USD and GBP/USD lower
Markets raised the probability of a September U.S. rate increase to 57 percent after Warsh’s Jackson Hole remarks, while the DXY traded around 99.5.
The U.S. dollar strengthened at the start of August as markets increased bets on a September Federal Reserve rate increase following more hawkish remarks from Fed Chair Kevin Warsh at Jackson Hole, according to Yahoo Finance. The report said the probability of a September hike rose to 57 percent from 35 percent, lifting expectations for U.S. interest rate differentials.
The article linked the dollar’s move to higher Treasury yields, noting two-year notes around 4.33 percent near a one-month high. It also pointed to geopolitical tension tied to U.S. strikes on Iran’s Larak Island and Iran’s retaliation against Jordan as a factor supporting defensive demand for the dollar.
In the currency pairs, the euro found support from a comparatively hawkish European Central Bank, with the report citing ECB meeting minutes that suggested another rate hike was seen as inevitable. It said a move from 2.25 percent to 2.50 percent remained a viable option in September if inflation stayed elevated.
For sterling, the report said expectations for Bank of England rate hikes were reduced further, with the pound set up for monthly gains despite still-high inflation. It added that the U.S. Dollar Index was trading around 99.52 after recovering from a 98.56 low, with resistance cited near 99.58 to 99.73 and support around 99.49.
Latest closeEUR/USD 1.160 ▼0.2%|GBP/USD 1.351 ▼0.3%|Dollar index 99.65 ▲0.2%