The US Dollar Index (DXY) has eased to around the 99 level, moving in tandem with lower US Treasury yields after Federal Reserve Governor Waller indicated a preference to keep rates unchanged in September if the current disinflation trend continues [1]. Waller emphasized the importance of allowing 'disinflation a chance,' expressing expectations for a reasonable CPI print and suggesting that the current policy stance could still guide inflation back toward the 2% target [1].
Waller also noted that much of the impact from tariffs has already passed through and that higher energy prices have not yet significantly affected broader price levels [1]. However, he maintained a cautious stance, keeping the possibility of a rate hike open should inflation accelerate again, and described current policy as only slightly restrictive [1].
Following Waller's remarks, market expectations for a September Fed rate hike dropped to around 50%, down from 68% on September 1, highlighting increased uncertainty and the growing importance of upcoming economic data releases [1]. The immediate market focus is on the US payrolls report, with next week's CPI and PPI data seen as potentially decisive for the Fed's September decision [1].
Technically, the DXY remains within a broader bearish trend channel, with mild bullish momentum on the daily chart but a declining RSI. Key support levels are identified at 98.60/70 and 98, while resistance is seen at 99.40 and 99.75 [1]. US markets will be closed on Monday for the Labor Day holiday [1].
CONCLUSION
The US Dollar Index is trading near 99 as Fed rate hike odds for September have fallen to 50% following Governor Waller's comments. Market participants are now closely watching upcoming payrolls, CPI, and PPI data for further direction, with the DXY expected to remain volatile within its bearish channel.