The DXY Index depreciated by 0.8% in the first four days of this week to 98.4, returning to the mid-point of its descending price channel. Last Friday’s weaker-than-expected US nonfarm payrolls reinforced market expectations that the Fed would resume its rate-cutting cycle in September. This places next week’s US CPI release on August 12 in sharp focus, as it could determine whether the DXY drifts lower along the mid-point near 98 or extend losses towards the floor around 96. 
CPI inflation is expected to edge up to 2.8% YoY in July from 2.7% in June, but slow to 0.2% MoM from 0.3%. A softer outcome would give the dovish FOMC members more cover to push for an earlier or deeper rate cut. Conversely, an upside surprise could temper easing bets – though it would still be weighed against moderating labour market momentum. The Kansas City Fed’s Jackson Hole Economic Policy Symposium on August 21-23, themed “Labor Markets in Transition. Demographics, Productivity, and Macroeconomic Policy,” will provide a forum for assessing this policy debate.
Political developments are adding to the dovish tilt at the US Federal Reserve. US President Donald Trump has nominated National Economic Council Advisers Chairman Stephen Miran to temporarily replace Fed Governor Adriana Kugler, pending the US Senate’s confirmation. Kugler resigned before her term ends in January. Miran is viewed as sympathetic to Trump’s preference for faster rate cuts. Fed Governor Christopher Waller, who voted for a cut with Governor Michelle Bowman at last week’s FOMC meeting, is emerging as Trump’s preferred successor to Chair Jerome Powell when his term ends in May 2026. The nominations come amid signs that some Fed Presidents, who have previously urged patience, are now signalling openness to easing, citing slowing job growth and tightening credit conditions. 
The global backdrop reinforces this shift. Yesterday, the Bank of England lowered its bank rate by 25 bps to 4% despite projecting a temporary rise in inflation, underscoring a broader trend of prioritizing growth and financial stability over near-term inflation overshoots – particularly amid heightened uncertainty from Trump’s latest tariff actions. With Miran’s nomination and global peers cutting rates, Fed doves could be emboldened to pre-empt a sharper slowdown rather than wait for inflation to return to target. Notably, the New York Fed’s latest 1-year inflation expectations gauge showed none of the tariff-driven anxiety ahead of April’s Liberation Day.
Quote of the Day
“In youth we learn, in age we understand.”
Marie von Ebner-Eschenbach
August 8 in history
ASEAN was founded by Indonesia, Malaysia, the Philippines, Singapore, and Thailand in 1967.
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