The dollar held near an eight-day high on Thursday after U.S. inflation and other economic data slightly lifted expectations of a Federal Reserve rate hike, ahead of the Jackson Hole central bankers’ symposium due to begin later in the day.
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The dollar was little changed on Thursday after a round of economic data, while attention began to shift toward a speech by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.
Warsh is scheduled to speak at the gathering of central bankers on Friday, where investors will listen for clues on how policymakers plan to navigate a landscape in which higher Treasury yields could do some of the tightening work for them.
The dollar has rebounded somewhat this week from sharp declines last week after U.S. Treasury Secretary Scott Bessent said the Treasury would double the size of quarterly repurchases of longer-dated bonds, sparking concern that a shift to a more direct strategy to mitigate the rise in borrowing costs could lead to a debasement of the dollar.
The dollar index, which measures the greenback against a basket of six currencies, edged up 0.01% to 99.17, with the euro flat at $1.1647.
“I’m surprised the dollar’s not a bit stronger actually. The FX market, honestly, is in a bit of a trance,” said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto.
“Warsh is saying the Fed needs to speak less so that the price signals from the bond market are cleaner, and then Bessent wants to distort those signals by intervening, it makes no sense. So that’s why it’s even more important for Warsh to set the record straight tomorrow, because if he doesn’t, the dollar could actually puke.”
Jobless claims fall, trade gap widens
The greenback showed little reaction to data from the Labor Department that showed weekly initial jobless claims fell for a second week to a seasonally adjusted 203,000, below the 208,000 estimate of economists polled by Reuters, indicating the job market remains stable.
A separate report from the Census Bureau showed the U.S. trade deficit in goods widened to $118.8 billion in July from $101.4 billion in June, the largest goods trade gap since March 2025.
Data on Wednesday showed inflation rose more than expected in July, boosting expectations that interest rates could stay restrictive through the end of this year and briefly lifting expectations for a September rate hike by the Fed to over 40%.
But expectations for a hike of at least 25 basis points at the central bank’s next meeting slipped back to 34.1% on Thursday, according to CME FedWatch.
While the focus turns to Warsh’s speech, many market participants expect the central bank head to refrain from offering any guidance on monetary policy.
As the Jackson Hole conference began, Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee shared their concerns about the U.S. inflation outlook.
