During today's Asian trading, the US dollar declined slightly against major currencies, partially offsetting yesterday's increase. Overall, market participants are being cautious ahead of Fed Chairman Jerome Powell's speech, which will take place at 14:00 GMT.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.16% to 101.34. Yesterday, the index rose by 0.34%, rebounding from the low of 2024. Fed policymakers on Thursday expressed support for the start of a monetary easing cycle at the September meeting, citing lower inflation and a cooling labor market. That sets the stage for Fed's Powell, who is due to speak at a central bank event in Jackson Hole, where traders will tune in to gauge when and by how much the Fed could lower borrowing costs in the near term. Analysts believe that Powell's comments will be consistent with the minutes of the Fed's July meeting, which showed that officials were strongly inclined to lower the rate at the September meeting, and some of them were even ready to immediately reduce the cost of borrowing. According to the CME FedWatch Tool, markets see a 24.5% probability of a 0.5% rate cut in September (down from 25% the week before), and a 75.5% probability of a 0.25% rate cut (up from 75.0% the week before), with a 1% rate cut expected by the end of the year. However, some analysts believe that the markets are behaving too aggressively and may be disappointed if Powell shows caution.
The yen rose 0.5% against the US dollar amid statements by Bank of Japan Governor Kazuo Ueda, who confirmed his determination to raise interest rates again if inflation stayed on course to sustainably hit the 2% target, but warned financial markets remained unstable. Overall, Ueda's statements indicated that market turbulence would not prevent the Central Bank from considering further rate hikes in the future, even if the next move is not imminent.