Dollar's Steady Climb and Powell's Crucial Speech: A Game-Changer Awaits

The U.S. dollar showed signs of resilience on Friday, maintaining its position for a robust weekly performance as the financial world turns its focus to Federal Reserve Chair Jerome Powell's highly awaited speech. Powell's address is expected to be a pivotal moment that could influence future interest rate trajectories.

A surprisingly weak employment report for July and downward revisions for May and June initially raised hopes for a reduction in borrowing costs. However, cautious comments from other Federal Reserve policymakers, coupled with inflationary economic data, have tempered these expectations. Currently, there's a 75% probability of a 25-basis-point rate cut in September, down from last week's 92%, according to CME's FedWatch tool.

Federal Reserve officials seem hesitant about a rate cut next month, making Powell's speech at the Jackson Hole conference even more critical. Investors are keenly awaiting cues from Powell, with Charu Chanana of Saxo noting that inflation is presently a bigger concern than labor. Similarly, Joseph Capurso from the Commonwealth Bank of Australia highlighted the dollar's asymmetric potential for gain if Powell refrains from confirming a rate cut.

(With inputs from agencies.)