US Dollar Index treads water below 109.00 ahead of data, Fedspeak

The index remains side-lined in the upper 108.00s so far.
US yields appear apathetic near recent highs on Wednesday.
The ADP report, Fed’s Mester next on tap in the US docket.

Pablo Piovano FXStreet

The greenback, in terms of the US Dollar Index (DXY), keeps the range bound theme unchanged near the 109.00 region midweek.

US Dollar Index focuses on data

The index alternates daily gains with losses so far this week, as the debate around the size of the next Fed rate hike and upcoming key results in US fundamentals remain at the centre stage and keep dictating the price action in the global markets.

Currently, and according to CME Group’s FedWatch Tool, the probability of a 75 bps rate hike in September is now at just above 68%, from around 28% a month ago.

In the US data space, the usual MBA Mortgage Applications are due in the first turn, while the ADP report is expected to update its data for the months of June, July and August ahead of the speech by Cleveland Fed L.Mester (voter, hawk).

What to look for around USD

The greenback remains within a consolidative phase under the 109.00 hurdle so far this week after retreating from Monday’s fresh cycle peaks around 109.50 when tracked by the US Dollar Index (DXY).

Bolstering the dollar’s strength appears the firm conviction of the Federal Reserve as it keeps hiking rates and looks likely to continue until inflation is well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market. This view was recently reinforced by Chair Powell’s speech at the Jackson Hole Symposium.

Extra volatility in the dollar, however, should not be ruled out considering the ongoing debate around the size of the September’s interest rate hike by the Federal Reserve.

Looking at the more macro scenario, the greenback appears propped up by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change (Wednesday) – Initial Claims, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Thursday) – Nonfarm Payrolls, Unemployment Rate, Factory Orders (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation over a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

US Dollar Index relevant levels

Now, the index is retreating 0.08% at 108.73 and faces the next contention at 107.58 (weekly low August 26) seconded by 106.59 (55-day SMA) and then 104.63 (monthly low August 10). On the flip side, a break above 109.47 (2022 high July 15) would aim for 109.77 (monthly high September 2002) and then 110.00 (round level).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD gains traction near 0.7100 as the post-Fed USD rally pauses

AUD/USD finds fresh buyers and retakes 0.7100 in the Asian session on Thursday as the US Dollar pauses its hawkish Fed-inspired rally to its highest level since late July. However, RBA rate-hike bets and hopes for US-Iran diplomatic efforts lift risk sentiment and support the risk-sensitive Australian Dollar and the major.

USD/JPY reverses a dip below 156.00 as focus shifts to BoJ

USD/JPY is reversing a brief dip below 156.00 in the Asian session on Thursday, looking to snap a three-day winning streak to a nearly two-week top set the previous day. The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen. This keeps the pair's upside limited, with the focus now shifting to the BoJ policy decision due on Friday.

Gold retakes $4,300 amid modest USD pullback but hawkish Fed caps upside

Gold climbs back above the $4,300 mark heading into the European session on Thursday, though it remains within striking distance of a six-week low touched the previous day. The US Dollar eases after touching a fresh high since late July and offers some support to the commodity. However, the Fed's hawkish outlook, along with escalating Middle East tensions, should continue to underpin the safe-haven and cap the non-yielding bullion.

XRP and XLM rebound amid mixed signals

Ripple (XRP) and Stellar (XLM) extend their recovery at the time of writing on Thursday after finding support at key technical levels. However, mixed derivatives and on-chain data for both altcoins suggest that traders remain cautious and have yet to show strong conviction in a sustained rebound. Derivatives data shows a mixed and cautious outlook among traders.

BoE expected to hold interest rate at 3.75%

The Bank of England (BoE) is set to reveal its latest monetary policy decision on Thursday, coinciding with its sixth rate-setting meeting of 2026. Market analysts expect the central bank to keep its benchmark interest rate steady at 3.75%, which should be its sixth hold in a row following December’s 25-bps rate cut.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.