Market Analysis

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is slightly down, hovering near 103.20. The decline in US Treasury yields, currently at 4.01% and 3.97%, is adding pressure on the Greenback.

The US Dollar is facing headwinds as expectations grow that the Federal Reserve (Fed) may cut interest rates in September. Traders are weighing mixed economic signals to gauge whether the US will achieve a soft landing or fall into a recession. According to the CME FedWatch tool, markets are now fully pricing in a 25-basis point rate cut by the Fed in September.

Kansas City Fed President Jeffrey Schmid mentioned on Thursday that easing monetary policy could be "appropriate" if inflation remains subdued. He also noted that while the Fed is nearing its 2% inflation target, it hasn't fully reached it yet, as reported by Reuters.

On the economic front, US Initial Jobless Claims fell to 233,000 for the week ending August 2, below the market forecast of 240,000. This follows an upwardly revised figure of 250,000 for the previous week, which was the highest in a year.

However, the downside for the Greenback may be limited due to rising safe-haven demand amid escalating geopolitical tensions in the Middle East. Israeli forces have intensified airstrikes on the Gaza Strip, resulting in at least 40 casualties on Thursday, according to Palestinian medical sources. This escalation has heightened the conflict between Israel and Hamas-led militants, with Israel preparing for the potential of a broader regional conflict following the killing of senior members of Hamas and Hezbollah.

Paraphrasing text from "FX Street" all rights reserved by the original author.