Dollar steady as markets digest Powell’s dovish tilt

The US dollar held steady on Monday, consolidating after Friday’s drop triggered by Jerome Powell’s remarks at Jackson Hole.

The market paused following the nearly 1% slide at the end of last week, reassessing the trajectory of US monetary policy and awaiting fresh economic signals.

In his speech, Powell highlighted that while unemployment remains low, risks to the labor market are building and policy is still restrictive. He also pointed to shifts in tax, trade, and immigration policies as structural forces reshaping the outlook. The comments reinforced the view that the Federal Reserve is moving cautiously but may soon recalibrate its stance, weighing down on the greenback.

Markets interpreted the address as a clear dovish signal, with futures now pricing an almost 90% probability of a September rate cut. This reflects growing conviction that restrictive policy is no longer warranted, particularly as risks tilt toward slower growth and weaker labor dynamics.

Treasury yields rose slightly on Monday, stabilizing after the prior session’s sharp retreat as the market reacted to Powell’s guidance and the expectation of imminent policy easing. Investors could wait for confirmation from incoming data, which could generate additional volatility and sharp moves.

Looking ahead, Thursday’s second estimate of Q2 GDP and Friday’s release of the July PCE price index will be closely watched. Stronger growth or sticky inflation could reinforce expectations of a slower easing path and lend temporary support to the dollar and yields, while softer readings may keep pressure on the currency and yields.