The dollar index (DXY) rose by 0.41% to a 1.5-week high on Thursday, supported by hawkish comments from Kansas City Fed President Jeffrey Schmid and Cleveland Fed President Beth Hammack, who emphasized the need for “modestly restrictive” monetary policy due to inflation risks. The dollar’s gains were further bolstered by stronger-than-expected US economic reports, including a 3-year high in the S&P manufacturing PMI and a 2.0% increase in existing home sales, which reached 4.01 million.
However, the dollar faced headwinds from rising weekly initial jobless claims, which increased by 11,000 to a 2-month high of 235,000, and ongoing concerns about the Fed’s independence amid political pressures. Additionally, the Eurozone’s consumer confidence index fell to a 4-month low, contributing to weakness in the euro, which decreased by 0.36% against the dollar.
In macroeconomic implications, swaps are pricing in a 72% chance of a 25 basis point rate cut at the Federal Open Market Committee meeting on September 16-17, further highlighting the tension between current economic indicators and Fed interest rate policy.
