FX.co ★ Dollar Rises After Sharp Drop

The dollar index advanced towards the 98 mark on Monday, regaining some of the ground it lost in the previous session as investors continued to evaluate the potential direction of Federal Reserve policy. In the prior session, the index nearly dropped by 1% following Fed Chair Jerome Powell's remarks at the Jackson Hole symposium, where he hinted that rate cuts could be forthcoming. Powell stressed that despite low unemployment, there are growing risks to the labor market and that monetary policy remains "restrictive," suggesting potential adjustments. He also highlighted the impact of evolving tax, trade, and immigration policies as significant drivers of economic change. Currently, market expectations reflect an 87% probability of a 25 basis point rate cut in September, up from approximately 75% earlier in the week. Markets will closely watch the release of July's personal consumption expenditures price index, the Fed’s preferred inflation gauge, on Friday for additional insights into future policy actions.