Dollar Falls, Gold Rises on Dovish Comments from Fed Governor Waller
The U.S. dollar index fell to a 1.5-week low as investors reacted to dovish remarks by Federal Reserve Governor Christopher Waller. He indicated support for holding interest rates steady at the upcoming FOMC meeting if inflation data shows continued progress toward the central bank's 2% target, reducing market expectations of a rate hike from 65% to 52%. The dollar also faced pressure due to a stronger yen and mixed economic indicators such as rising U.S. initial unemployment claims and unexpected increases in services sector prices. Gold surged amid reduced inflation hawkishness and the weakening greenback. Meanwhile, the euro gained ground against the dollar after Waller's comments weakened the U.S. currency further. The Eurozone also saw stronger-than-expected producer price data, reinforcing expectations of a rate hike by the European Central Bank at its next meeting on September 10. The yen rallied to a one-month high as concerns over potential Japanese government intervention and speculation about increased bond holdings by Japan's Government Pension Investment Fund supported demand. The market is pricing in nearly certain interest rate hikes from both the ECB and BOJ, with the latter expected to raise rates at its September 18 meeting.
Topics: dollar fed_policy gold inflation