Dollar Regains Footing Ahead of Jackson Hole

The US dollar has regained its footing ahead of the Jackson Hole economic symposium, which kicks off today. The currency's value is being closely watched as investors await clarity on the Federal Reserve's policy stance and its impact on interest rates.

Yesterday's US inflation data showed that July's core PCE (Personal Consumption Expenditures) index matched expectations, but headline inflation came in slightly stronger than forecast. This development has left markets wondering whether price pressures are easing too slowly for the Fed to consider a rate hike later this year.

The broader macro picture remains mixed, with inflation making slow progress towards target and consumer fundamentals remaining soft. Business investment is resilient, while recent activity indicators suggest growth is holding steady rather than accelerating.

Rising long-end bond yields and renewed discussion around fiscal sustainability have revived a policy risk premium in the dollar's value, limiting its ability to benefit from elevated yields in the traditional way. This has created a tug-of-war between resilient nominal growth and growing policy-related concerns.