Dollar Holds Ground Near 99 as Market Awaits Jackson Hole Symposium

The US Dollar held its ground near 99 on Thursday, buoyed by the previous day's Personal Consumption Expenditure (PCE) Price Index report for July. The headline PCE Price Index grew at a steady pace of 3.7% Year-on-Year, while it was expected to cool down to 3.6%. The Federal Reserve's preferred inflation gauge, core PCE inflation, arrived in line with estimates and the prior release of 3.3% YoY.

The Fed's interest rate expectations for the September meeting or later have barely moved after the inflation data release. According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged in the September policy meeting are almost steady at 64%. Financial market participants shift their focus to the Jackson Hole Symposium, where Fed Chairman Kevin Warsh is scheduled to speak on Friday.

Economists at DBS Group Research highlight that Kevin Warsh would confront a complex policy communication challenge if he were to steer the Fed. They argue that overall, Warsh faces a difficult balancing act: defending the Fed's independence and price-stability mandate while providing greater clarity on the Fed's reaction function without abandoning his preference for less forward guidance.