The dollar index (DXY00) rallied to a 1-week high today and is up by +0.41%. The dollar jumped today on hawkish comments from Fed Chair Warsh, who warned inflation isn’t meaningfully slowing and vowed that policymakers will return inflation to their 2% target. The chance of a Fed rate hike at next month’s FOMC meeting rose to 50% from 36% before Warsh’s speech. Today’s unexpected upward revision in the University of Michigan US Aug consumer sentiment index is also supportive for the dollar.
Limiting gains in the dollar is today’s -1% decline in WTI crude oil, which weakened inflation expectations and could persuade the Fed to loosen monetary policy, a bearish factor for the dollar. Also, the unexpected downward revision to US 2026 nonfarm payrolls suggests the labor market was weaker than previously stated, a dovish factor for Fed policy. In addition, the unexpected contraction in the Aug MNI Chicago PMI is negative for the dollar.
