The dollar index inched down to 99.5 on Monday, pausing after a three-session rally that had pushed the greenback to a two-week high, as traders ramped up bets on a Federal Reserve rate hike in September. Remarks from Fed Chair Warsh at the Jackson Hole Symposium on Friday reinforced those expectations, with Warsh noting that the Fed would “have work to do” if policymakers did not gain confidence that inflation was moving toward the 2% target.
Warsh has consistently stressed the need to bring inflation down, even as the Fed left interest rates unchanged at both its June and July meetings, leaving some uncertainty about the timing of any potential move. Futures markets are now pricing in roughly a 60% chance of a 25 basis-point rate increase in September.
Investors are turning their attention to a slate of key economic releases that could shape the Fed’s next steps, including Friday’s US jobs report. Despite the recent rebound, the dollar index is on track to fall about 0.2% in August, its second consecutive monthly decline.