**Dollar Index Rises to 2-Week High Amid Hawkish Fed Signals**
The dollar index (DXY) increased to a 2-week high on Friday, closing up 0.61%, following comments from Fed Chair Warsh. He emphasized that inflation is not meaningfully slowing and reiterated the Fed’s commitment to return inflation to its 2% target. As a result, the probability of a Fed rate hike at the upcoming FOMC meeting on September 15-16 surged to 57% from 36%.
Simultaneously, the University of Michigan’s revised consumer sentiment index for August increased to 51.7, up from an initial estimate of 51.0. However, a downward revision of 79,000 jobs in the U.S. nonfarm payrolls for 2026 indicated a weaker labor market. The MNI Chicago PMI, meanwhile, unexpectedly fell to 47.1, reflecting the steepest contraction in 8 months.
In the Eurozone, the economic confidence index for August rose 1.3 points to a 7-month high of 98.4, while the euro dropped 0.62% against the dollar. In Japan, the jobless rate fell to 2.4%, and inflationary pressures were noted as the Tokyo CPI rose to 1.9% year-on-year, aligning with expectations. The markets are pricing in a 94% chance of a rate hike by the ECB on September 10 and an 84% chance of a BOJ hike on September 18.
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