US Dollar Index posts modest gains above 98.50 as traders await Fed Governor replacement
US Dollar Index posts modest gains around 98.80 in Wednesday’s Asian session.
Trump took Scott Bessent off his shortlist to replace Jerome Powell as the next Fed chair.
Traders have priced in higher chances of an imminent Fed rate cut.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades with mild gains near 98.80 during the Asian trading hours on Wednesday. Traders brace for the speeches from the Federal Reserve (Fed) policymakers later in the day, including Susan Collins, Lisa Cook and Mary Daly.
The DXY remains firm as traders continue to assess global trade developments, which could stir fresh volatility across the market. US President Donald Trump's latest trade deadline is also on Friday, when a fresh round of high tariffs will go into effect on multiple nations unless last-minute deals are reached to negotiate lower levies. Trump's announcement of these additional tariffs could boost the US Dollar against its rivals.
Trump on Tuesday said he would announce decisions soon on a nominee for the next Fed chair. He ruled out US Treasury Secretary Scott Bessent as a candidate to succeed current Chairman Jerome Powell, whose term expires in May 2026. Trump will also reveal a decision on a short-term replacement for Fed Governor Adriana Kugler, who resigned last Friday.
On the other hand, a soft US jobs report boosts bets of a rate cut by the US central bank next month. Additionally, the downbeat US Purchasing Managers Index (PMI) report released on Tuesday contributes to the DXY’s downside. Data released by the Institute for Supply Management (ISM) on Tuesday revealed that the Services PMI eased to 50.1 in July, versus 50.8 prior. This figure came in weaker than the expectations of 51.5.
Traders will take more cues from the Fed’s speeches, as they might offer some hints about the US interest rate outlook this year. Any dovish remarks from Fed officials could further undermine the Greenback, while hawkish comments from policymakers could boost the USD in the near term.
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