Dollar Extends Warsh-Driven Rally as DXY Tops 99.60

The US Dollar Index sits at 99.6140, up 0.55% as Monday's session gets underway, extending a move that marked the dollar's largest single-session gain of its recent run into Friday's close. That Friday (Aug 28) rise followed Fed Chair Kevin Warsh's debut Jackson Hole speech, where he warned that this summer's inflation readings did not show underlying trends meaningfully improving and warned the Fed would "have work to do" if inflation doesn't return to 2%. September hike odds on CME FedWatch jumped from about 35% to 57.5%, per Rabobank. Equities were mixed Friday: the S&P 500 slipped 0.10%, the Nasdaq fell 0.52%, while the VIX eased 0.55% to 14.43 — no sign of stress despite the dollar bid.

Treasury yields moved higher: the 5-year added 8.5bp to 4.481%, the 3-month rose 5.2bp to 3.730%, the 10-year gained 4.8bp to 4.720%, and the 30-year edged up 1.5bp to 5.206%. The Fed funds target remains 3.50-3.75%, and the live 2026 policy question is whether the Fed hikes again, not whether it cuts. September hike odds jumped from about 35% to 57.5% on CME FedWatch, per Rabobank, after Warsh's Jackson Hole remarks, in which he said this summer's better-than-expected inflation readings "do not tell me that underlying trends have meaningfully improved" and recommitted to the Fed's 2% target. The Guardian separately reported the Fed chair framing the delivery of stable prices as the central bank's job.

EUR/USD: 1.1582, -0.60%, sliding back toward mid-August levels after Friday's dollar rise; the ECB held its deposit rate at 2.25% on July 23, and Chief Economist Philip Lane said August 18 he sees inflation staying near 3% through year-end. GBP/USD: 1.3533, -0.44%, the weakest since August 19; UK markets are shut today for the Summer Bank Holiday, and BoE Governor Andrew Bailey told Bloomberg TV at Jackson Hole he was seeing subdued second-round effects and a softening labour market, with hike bets pushed from late 2026 into 2027. USD/JPY: 160.10, +0.44%, near a one-month high; Tokyo core CPI accelerated to 1.8% y/y from 1.7%. USD/CAD: 1.3903, +0.35% — covered below.

USD/CAD trades at 1.3903, up 0.35%, reversing from the three-month low near 1.376 hit August 21 and capping the loonie's steepest weekly decline in over two months. Friday's driver was the same one moving the whole dollar complex: Warsh's Jackson Hole speech lifting September hike bets. Statistics Canada's Q2 GDP landed the same day and pointed to firm annualized growth on an auto-export rebound, but it didn't offset the US dollar bid. Oil added pressure: WTI sits at 83.44, -0.13%, while Brent is at 88.10, -1.78%, extending a roughly 5% weekly loss as Middle East/Hormuz supply-risk premium eased. The Bank of Canada held its rate at 2.25% on July 15, a sixth straight hold; its next decision lands September 2, also expected to hold. No major Canadian release is confirmed for today.

Japan's Housing Starts y/y is due at 15:00 (forecast 7.5%, previous 18.6%). Germany's Preliminary CPI m/m follows at 16:29 (forecast 0.3%, previous 0.8%), the first of the flash euro-area inflation prints ahead of Tuesday's bloc-wide flash CPI. UK markets, including the LSE, are shut for the Summer Bank Holiday (17:00 calendar entry, no data due), so sterling liquidity will likely be thinner than usual. The G20 finance ministers and central bank governors meeting in Asheville, NC runs into September 1, with Bank of Japan Governor Ueda expected to attend as the yen debate continues.