Dollar Soars on Hawkish Warsh Comments, Rate Hike Chances Rise

The dollar index (DXY00) reached a two-week high on Friday after hawkish comments from Fed Chair Warsh. The dollar jumped +0.61% as Warsh warned that inflation isn't meaningfully slowing and vowed to return it to the 2% target.

Warsh's speech boosted the chance of a Fed rate hike at next month's FOMC meeting to 57%, up from 36% before his comments. The University of Michigan US Aug consumer sentiment index was revised upward by +0.7 to 51.7, stronger than expectations.

The dollar also found support in Friday's unexpected upward revision in the University of Michigan US Aug consumer sentiment index. However, a dovish factor for Fed policy came from an unexpected downward revision to US 2026 nonfarm payrolls, signaling the labor market was weaker than previously stated.