The Dollar Index (DXY) fell to 108.062, remaining near its high of 109.29 incurred the month before.
The Fed is expected to keep up its hawkish increases in interest rates with inflation still soaring, according to hawkish remarks from a number of Fed members in the past week or two, which have helped the dollar.
This puts the annual meeting of the Federal Reserve, which begins later in the day in Jackson Hole, and in particular Powell’s speech at the conclusion of the week, squarely in the spotlight.
Fed officials have been involved in managing anticipation over the past several weeks, suggesting that the central bank has a stronger hawkish stance on policy and denies the economic issues that investors are so concerned about. Market participants are guessing whether or not this portends a 75 bps rate increase in the next month, which would be the third in succession.
A FxPro analyst noted that: “the dollar index is moving towards 120 (+10.5% to the current price), which is at its 2001-2002 highs. It is likely that on the approach to these levels, even the hawkish Fed and Treasury are concerned about a strong dollar.”
The euro/dollar exchange rate increased to 1.0020, returning to parity as the German economy improved in Q2, rising to the challenge of a contraction.
The European Central Bank (ECB) is expected to release its meeting minutes from last month and considering that the central bank increased interest rates by 50 bps, the anticipation is that the stance is more dovish.
GBP/USD increased to 1.1852, recovering from its weakest point of 1.1718 in two years as a result of the nation’s protracted recession. According to the Bank of England (BoE), a recession will begin in the fourth quarter and extend through the next two years.
Regardless of remarks made earlier by Toyoaki Nakamura, a BoJ board member, that current impediments to the Japanese economy from soaring prices for commodities and COVID-19 cases imply that the central bank is highly improbable to increase interest rates in the near future, the Japanese yen rebounded against the greenback as it dropped to 136.60.