Dollar hits yearly low as markets await payroll data and Powell Jackson Hole insights

The U.S. dollar reached its lowest level of the year against the euro on Wednesday, as markets anticipated key U.S. payroll data revisions and Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium. The dollar also fell below 145 yen and neared a one-year low against the pound, pressured by declining U.S. bond yields. The euro climbed to $1.1131, its highest since December, while the pound reached $1.3033.

Earlier in the month, weak U.S. payroll data had fueled speculation of significant interest rate cuts by the Federal Reserve, leading to heightened market volatility. However, recent stronger economic data has moderated these expectations, with traders now leaning toward a smaller rate reduction. This has made Powell’s upcoming Jackson Hole speech particularly important, as it could provide critical insights into the Fed’s future policy direction. The U.S. dollar index, reflecting these uncertainties, dropped to its lowest point since January.

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Simultaneously, attention is also on Japan, where the yen briefly strengthened as the dollar dipped below the key 145 yen level. A special session of Japan’s parliament on Friday will focus on the Bank of Japan’s unexpected rate hike and its shift toward a more hawkish stance. The testimony of BOJ Governor Kazuo Ueda will be closely monitored, especially given the more dovish tone recently adopted by his deputy.