Dollar extends gains ahead of Powell speech

The dollar index climbed above 98.6 on Friday, reaching its highest level in nearly two weeks as traders positioned cautiously ahead of Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole symposium. Market participants are looking for clarity on whether the Fed will endorse current expectations for policy easing or push back in favor of maintaining restrictive conditions for longer.

Rate futures currently imply about a 75% chance of a 25 basis point cut in September, down from more than 90% just a week ago, as hawkish remarks from Fed officials tempered earlier dovish bets. Policymakers have repeatedly warned that tariff-related price pressures continue to pose upside risks to inflation, while evidence of broad-based labor market deterioration remains limited. Kansas City Fed President Jeffrey Schmid emphasized that “modestly restrictive” monetary policy is still necessary to keep inflation in check, while Cleveland Fed President Beth Hammack reiterated that she does not support cutting rates at this stage, arguing that premature easing could undermine progress on price stability.

The greenback’s resilience weighed on major peers, with the euro and sterling slipping further while commodity-linked currencies such as the Australian and Canadian dollars also struggled. The Japanese yen weakened toward recent lows, adding to the dollar’s strength. Beyond currency markets, the firming dollar also exerted pressure on precious metals, with gold and silver consolidating near multi-week lows.

Investors are now focused on Powell’s remarks for potential confirmation of a September rate cut or signals that the central bank could delay action until later in the year. A dovish tilt could rein in the dollar’s advance, while any pushback against aggressive easing bets may extend its rally. Broader sentiment across global markets remained cautious, with equities subdued and bond yields steady as traders braced for fresh direction from the Fed.