Dollar edges higher ahead of Fed minutes

The dollar index advanced above 98.3 on Wednesday, extending its winning streak to a third consecutive session as investors positioned ahead of key Federal Reserve communications.

The July FOMC meeting minutes, due later today, are expected to shed light on internal divisions after the gathering marked the first instance since 1993 in which two members—governors Christopher Waller and Michelle Bowman—formally dissented, favoring a quarter-point rate cut instead of leaving policy unchanged. Their votes underscored rising pressure within the committee to respond preemptively to signs of softer labor market conditions and cooling inflation.

Looking ahead, markets are squarely focused on Fed Chair Jerome Powell’s speech at the Jackson Hole symposium later this week. Traders are keen to see whether Powell pushes back against the current market consensus for rapid easing or instead validates expectations for rate cuts beginning in September.

At present, futures imply an 85 percent probability of a quarter-point reduction next month, with about 54 basis points of total easing priced in by year-end. Some analysts, however, argue that the Fed may opt for a larger 50 basis point move if upcoming data, including jobless claims and retail sales, confirm deteriorating momentum.

The greenback strengthened broadly across major peers, with the sharpest gains registered against the euro, sterling, and Australian dollar. The euro slipped back as traders digested lackluster Eurozone GDP growth of just 0.1 percent in the second quarter, alongside stable inflation at 2 percent, both of which reinforced expectations that the European Central Bank will remain on hold.

Sterling retreated after an upside inflation surprise narrowed room for further Bank of England easing, while the Australian dollar came under pressure from dovish Reserve Bank guidance and renewed weakness in commodity-linked currencies.

Against Asian currencies, the picture was more mixed. The dollar held steady versus the yen as safe-haven demand persisted amid geopolitical uncertainty, while the offshore yuan softened slightly after the People’s Bank of China left its key loan prime rates unchanged for a third consecutive month.

Emerging market currencies, particularly those exposed to global trade flows, also faced renewed headwinds as the dollar’s rebound coincided with waning risk appetite in equities and commodities.

Overall, the dollar’s near-term trajectory remains tied to how strongly Powell reaffirms—or resists—market bets on imminent easing. A cautious tone could prompt some unwinding of dovish positions and support further gains in the dollar index, while an outright dovish pivot could accelerate selling pressure on the greenback.