Dollar Stagnation Looms as Fed Decision Nears
The US dollar has been stuck in neutral for over a month, hovering around the same level. The Dollar Index (DXY) is currently sitting near 99, and despite a strong case for a stronger dollar, it's unclear what will happen next.
The Federal Reserve has kept interest rates at 3.50%, 3.75%, while August producer inflation hit 5.4% year-on-year. The US added 162,000 jobs last month, and Brent crude is back above $100, giving the Fed reason to stay aggressive.
Other central banks are also raising interest rates: the European Central Bank (ECB) raised its deposit rate to 2.50%, while the Bank of Japan is expected to lift rates to 1.25% next week. US-Japan intervention has also helped strengthen the yen from almost 164 per dollar in July to around 155.
The market is now divided, with futures pricing about a 70% chance of a Fed hike next week, but a Reuters poll found that about 70% of economists expect no change. The weekly chart for the DXY remains neutral, but the daily chart shows a weakening trend.