The US Dollar remained resilient on Tuesday despite softer-than-expected US economic data, with EUR/USD trading around 1.1601 after touching an intraday low of 1.1587, down roughly 0.14% on the day [1]. The ISM Manufacturing PMI fell to 54.6 in August from 55.6 in July, missing the forecast of 55.2, while the ISM Prices Paid Index held steady at 71.1, below expectations of 72.0. JOLTS Job Openings rose to 7.271 million in July from 7.182 million but fell short of the 7.3 million forecast [1]. The US Dollar Index (DXY) retreated toward 99.55 after reaching an intraday high of 99.65, but downside was limited as the data did little to alter hawkish Fed expectations [1].
Fed Chair Kevin Warsh’s tough stance at the Jackson Hole Symposium reinforced September rate hike bets, with Fed Governor Michael Barr stating that "the persistence of inflation above target creates risks" and warning that "if inflation doesn’t moderate soon, it will be time for an interest rate hike" [1]. According to the CME FedWatch Tool, traders see around a 66% probability of a rate hike at the September 15-16 meeting [1]. Elevated oil prices due to Middle East tensions are also adding to inflation risks, supporting expectations for continued hawkish central bank policies [1].
TD Securities’ macro team maintains a bearish view on the Dollar, arguing that incoming US data should steer the Fed toward a September rate hold, with the broader USD trend seen weaker into year-end as US midterm election scenarios and macro fundamentals drive FX [2]. They suggest fading USD rallies against SEK and AUD in G10 and against MXN and ZAR in EM, and note that "words alone are unlikely to be enough to shift the broader FX narrative" [2]. TD Securities expects the USD to modestly weaken into year-end, but a "Blue Wave" scenario could lead to knee-jerk USD strength, while Republican control would be most bearish for the USD [2].
Gold pricing remains supported despite the hawkish tone from Fed Chair Warsh at Jackson Hole, with TD Securities analysts noting that positioning in gold is holding firm and do not anticipate material downside for the yellow metal. They argue that the landscape for precious metals has improved amid renewed dollar debasement themes and uncertain Fed hikes, while renewed tensions in the Middle East have seen CTAs turn buyers in crude oil [3].
CONCLUSION
Despite softer US economic data, the US Dollar remains firm as hawkish Fed rhetoric and inflation concerns dominate market sentiment. Analysts at TD Securities expect the Fed to hold rates in September and see the USD weakening into year-end, barring political surprises. Gold and the Euro show resilience, with precious metals supported by dollar debasement themes and uncertain Fed hikes.