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US Dollar Retreats Slightly After Friday’s Jump, September Hike Bets Remain Firm
(MENAFN- MENAFNEditorial) The US dollar retreated slightly after Friday’s jump, but remained near a two-week high. The currency could remain supported after Federal Reserve Chair Kevin Warsh’s comments at the Jackson Hole Symposium. Warsh suggested that the central bank would need to take further action if inflation remains above the 2% target.
The comments prompted a re-pricing of monetary policy expectations, with markets now assigning a 60% probability for a rate increase in September, up from 40%. Markets also see the possibility of an additional increase later on. This could keep Treasury yields elevated despite a retreat today.
Rising oil prices could also revive concerns about persistent inflation, placing upward pressure on yields and strengthening the dollar if the trend persists. However, any move towards de-escalation could ease these pressures and pull the dollar and yields down.
Looking ahead, attention turns to a dense data calendar. Tomorrow brings the ISM manufacturing index and JOLTS job openings, followed by ISM services on Thursday and non-farm payrolls on Friday, alongside several interventions from Fed officials. Strong figures could reinforce bets on tightening and extend the rise in yields, while weaker figures could prompt markets to soften their expectations and weigh on the currency. As a result, the dollar and yields could see volatility as monetary policy expectations shift rapidly in the event of surprises.
The comments prompted a re-pricing of monetary policy expectations, with markets now assigning a 60% probability for a rate increase in September, up from 40%. Markets also see the possibility of an additional increase later on. This could keep Treasury yields elevated despite a retreat today.
Rising oil prices could also revive concerns about persistent inflation, placing upward pressure on yields and strengthening the dollar if the trend persists. However, any move towards de-escalation could ease these pressures and pull the dollar and yields down.
Looking ahead, attention turns to a dense data calendar. Tomorrow brings the ISM manufacturing index and JOLTS job openings, followed by ISM services on Thursday and non-farm payrolls on Friday, alongside several interventions from Fed officials. Strong figures could reinforce bets on tightening and extend the rise in yields, while weaker figures could prompt markets to soften their expectations and weigh on the currency. As a result, the dollar and yields could see volatility as monetary policy expectations shift rapidly in the event of surprises.
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