"This climb, which pushed the index to its highest level in nearly three weeks, cannot be viewed merely as a technical move, but rather as a reflection of several economic factors that have temporarily bolstered confidence in the U.S. currency, while at the same time raising questions about the sustainability of these gains given the uncertainty surrounding the future path of interest rates and inflation."
"The divergence in Fed officials' remarks underscores the internal split on the appropriate timing to begin the next easing cycle. Jeffrey Schmid has argued for rate cuts to protect the labour market from potential future pressures, while Austan Goolsbee has stressed the risks of doing so while inflation remains above target. Mary Daly has taken a more cautious stance, noting that balancing employment objectives with price stability requires measured-not hasty-decisions."
Markets showed caution ahead of the August Personal Consumption Expenditures inflation release as the U.S. Dollar Index rose modestly near 98.40, reaching a near three-week high. Strong economic indicators supported the currency, including a final Q2 GDP annualized growth of 3.8% and initial jobless claims falling to 218,000. These data points underscore resilient economic momentum and reinforce the Federal Reserve's cautious stance on early rate cuts. Divergent comments from Fed officials on the timing of easing — emphasizing protection of the labor market versus risks of premature cuts while inflation remains above target — leave uncertainty about the sustainability of dollar gains.
Read at London Business News | Londonlovesbusiness.com
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