Investors held minimal positions ahead of Fed Chair Jerome Powell's Jackson Hole address, leaving the US dollar mostly unchanged amid caution over monetary policy and political risks. Markets priced an 81% chance of a 25-basis-point September cut and expected another cut in December, while Fed minutes showed continued focus on inflation with internal divisions widened by weaker labor data and tariff risks. Jobless claims data could clarify the jobs market direction and sway monetary policy expectations. Treasury yields rose slightly, the 10-year near 4.3%. Political calls for a Fed governor's resignation renewed concerns about central bank independence.
The US dollar was mostly unchanged on Thursday as investors avoided major positioning ahead of the Federal Reserve's Jackson Hole symposium. Market participants remain cautious, with sentiment restrained by concerns about monetary policy and political risks. Attention now shifts squarely to Fed Chair Jerome Powell's address on Friday. Markets are pricing in an 81% chance of a quarter-point rate cut in September. Another cut is expected in December.
While recent minutes revealed the committee remains primarily focused on inflation risks, weaker labor market data and tariffs risks have widened internal divisions. Investors are watching closely to see whether Powell will adopt a cautious tone, challenging expectations of imminent easing, or validate the current market view. In the meantime, the market could also react to the release of the jobless claims data today. The latter could provide a clearer picture of the direction of the jobs market and could influence the expectations toward monetary policy.
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