Warsh's Hawkish Tone Boosts USD, but Rate Hike Risks Remain

The US Dollar (DXY) gained modestly after Fed Chair Warsh's Jackson Hole speech, rising around 0.3% since Friday's open.

Warsh emphasized that inflation is not falling at sufficient speed, shifting risks towards a hike, but the FOMC's recent caution and upcoming NFP and CPI data could still justify holding rates.

The US dollar advanced 0.5% on Friday in response to Warsh's speech, but some of that move retraced yesterday.

MUFG's Derek Halpenny notes that the more modest US dollar reaction makes sense due to several factors, including the upcoming central bank meetings and the tone of rhetoric from most central bankers being hawkish.