Dollar Firms Toward 99.64 as Fed Hike Odds Climb Post-Warsh

The US Dollar Index is trading at 99.6410, up 0.30%, with roughly three hours left in the New York session (this is a live price around 14:00 ET, not the 17:00 close, so today's session is still open and the figure can move further). The move extends a dollar-bid tone running since Fed Chair Kevin Warsh's August 28 Jackson Hole speech, with the greenback firmer against the euro, sterling, the Canadian dollar and the Swiss franc, and higher against the yen. Equities are softer alongside it — the S&P 500 is down 0.73%, the Dow 0.87% and the Nasdaq 0.93% — while the VIX has jumped 6.50% to 15.89, a risk-off backdrop consistent with the dollar's bid.

US yields rose across the curve: the 10-year added 3.4bp to 4.792%, the 5-year 4.1bp to 4.548%, the 3-month 4.0bp to 3.772%, and the 30-year a smaller 1.4bp to 5.263%. The live policy question remains whether the Fed hikes, not cuts, from its current 3.50-3.75% target. That's the backdrop to Fed Chair Kevin Warsh's Jackson Hole speech (Aug 28), which called the 2% inflation target a 'firm, fixed target' and said the Fed still has 'work to do,' plus a Fed Governor Barr comment that he'll support a rate hike if inflation doesn't ease. Odds of a September hike, per CME FedWatch as reported across outlets, have risen since the speech to a range of roughly 60-66%, up from about 35% beforehand — exact point estimates vary by source.

EUR/USD is at 1.1588 (-0.25%), near a two-week low, capped by the hawkish Fed repricing even after euro-area flash inflation rose to 3.3% in August from 2.9% in July. GBP/USD is at 1.3513 (-0.26%), extending its recent pullback from late-August highs. USD/JPY is at 160.25 (+0.32%), with the yen struggling to strengthen back through 160 — a level traders are watching given the joint Japan-US intervention announced August 3. USD/CAD is at 1.3905 (+0.37%), with the Canadian dollar under pressure from broad dollar strength and US-Canada tariff friction ahead of today's Bank of Canada decision.

GBP/USD is changing hands at 1.3513, down 0.26%, extending Tuesday's slide when the pair traded below 1.3550 toward 1. The driver has been dollar strength since Chair Warsh's Jackson Hole speech, where he said underlying inflation must move to the objective 'clearly and at sufficient speed' — lifting priced odds of a September Fed hike as high as 66% by some counts (CME FedWatch, via CNBC). That held even as US ISM Manufacturing PMI for August came in soft at 54.6 versus 55.2 expected. On the UK side, markets have pushed back expected BoE tightening from late 2026 into early 2027, with added political uncertainty around the government's Autumn Budget. The BoE holds Bank Rate at 3.75%; its next decision is September 17. No major UK data is due today.

Today's calendar (Sydney times): French Government Budget Balance at 16:45 (previous -106.8B, low impact); Spanish Unemployment Change at 17:00 (forecast 15.4K, previous 19.5K, low impact); US ADP Non-Farm Employment Change at 22:15 (forecast 47K, previous 44K, medium impact); and the Bank of Canada's Rate Statement and Overnight Rate decision at 23:45 (forecast 2.25%, previous 2.25%, high impact), with economists surveyed expecting a seventh straight hold. Later releases — US Factory Orders, the BoC press conference, US crude oil inventories and the Fed's Beige Book — fall after midnight Sydney time and land in tomorrow's session.