Geopolitical Risks Support the Dollar
The modest rebound was supported by renewed geopolitical tensions in Eastern Europe. Russian drone strikes over the weekend damaged Ukrainian power facilities, cutting electricity to nearly 60,000 households, according to reports. In response, Kyiv pledged further retaliatory action.
These developments increased safe-haven flows into the US Dollar, though investors remain wary that prolonged instability could dampen broader market sentiment and growth prospects.
Fed Rate Cut Bets Limit Upside
Despite the geopolitical lift, expectations of Federal Reserve easing capped the dollar’s advance. The CME FedWatch Tool shows markets pricing an 89% chance of a 25-basis-point rate cut in September, up from 85% before last week’s US PCE inflation data.
The growing likelihood of policy easing suggests the Fed may prioritize supporting growth, weighing on the greenback.
Data Releases in Focus
Attention now turns to upcoming US data. The ISM Manufacturing PMI for August, due today, will gauge industrial health, while Friday’s Nonfarm Payrolls remains the key event.
Economists project a modest 75,000 job gain and unemployment at 4.3%.
