The US Dollar Index (DXY) stabilized above the 99.00 level, trading around 99.20 during Asian hours on Friday, following minor losses the previous day. This steadiness comes as investors adopt a cautious approach ahead of Federal Reserve Chair Kevin Warsh’s anticipated speech at the annual Jackson Hole symposium, where market participants are seeking clarity on the future direction of US interest rates [1]. Similarly, silver prices (XAG/USD) slipped below $69.00, trading near $68.80 per troy ounce, as traders also awaited Warsh’s remarks [2].
Both the Dollar and silver markets reacted to stronger-than-expected US inflation data released earlier in the week. The data has reinforced expectations for another Federal Reserve interest rate hike before the end of the year, with the CME FedWatch Tool indicating a 74% probability of a rate increase in December. However, traders are pricing in a 65% chance that the Fed will keep rates unchanged at its September meeting [1][2].
Strategists at Scotiabank described the recent Dollar strength as a corrective move within a broader downtrend, noting that near-term focus is on a potential retest of the mid-99 area for the DXY. Technical indicators show the DXY trading below its 50-day EMA, with a 14-day RSI at 39.49, suggesting lingering downside pressure. The FXS Fed Sentiment Index has softened toward 129.11, indicating a less supportive policy backdrop [1]. Meanwhile, Fed’s Hammack delivered a hawkish message, emphasizing the need to act against persistent inflation and suggesting that current policy is not restrictive enough, which could support further Dollar strength if markets reassess the rate path [1].
For silver, despite the near-term pressure from rate hike expectations, underlying support may come from concerns about a potential US debt crisis and long-term Dollar weakness, partly due to the US Treasury’s expanded debt buyback program [2]. TD Securities highlighted that trend-following flows remain supportive for precious metals, with CTA positioning in silver and platinum holding firm and simulations pointing to an increased likelihood of additional buying in the near term [2].
CONCLUSION
Both the US Dollar Index and silver prices are experiencing cautious trading as markets await signals from Fed Chair Warsh’s Jackson Hole speech. Stronger-than-expected US inflation data has heightened expectations for a December rate hike, supporting the Dollar and pressuring silver in the short term. However, ongoing concerns about US debt and systematic demand for precious metals may provide underlying support for silver moving forward.