USD Support Hinges on Fed Inflation Commitment

Market attention is focused on the US core Personal Consumption Expenditures (PCE) Price Index and Federal Reserve Chair Warsh's Jackson Hole remarks. Lower energy prices have contributed to a more favorable macroeconomic backdrop, reducing bond yields in the US and Europe without sparking concerns of USD debasement.

The US core PCE inflation data is expected, but its release could keep hawkish Fed risks alive even if policymakers remain on hold in September. Questions surrounding the Fed's reaction function and inflation control have heightened market focus on Chair Warsh's Jackson Hole comments.

If Warsh and other Fed officials reaffirm their commitment to returning inflation to the 2% target, USD support could be bolstered.