Dollar’s Quick Stumble and Resurgence
On Tuesday, the U.S. dollar tried to step back up after feeling a bit sluggish over the past two sessions.
Why the downturn?
- Recession worries – Traders feared the U.S. economy might spiral into a downturn.
- Fed’s rate‑cut game – The prospect of the Federal Reserve slashing rates by 50 basis points in September made the dollar less attractive.
What’s keeping the dollar afloat?
Despite the headwind, the dollar dipped back from the fall when the ISM services data surprised everyone with better numbers than expected. Fed officials’ remarks also provided a breath of fresh air, easing some of the gloom.
But the worry about future rate cuts still lingers, meaning the greenback might see more wiggles down the road.
The Treasury effect
The 2‑year and 10‑year U.S. Treasury yields rebounded from a one‑year low on Tuesday. This bounce came as the market digested the news that recession fears were easing, which had triggered a big sell‑off in stocks and unsettled investors.
Still, yields are likely to stay choppy, as traders react to new data and statements.
Keep an eye on the road ahead
Market watchers should be on the lookout for:
- Upcoming economic releases
- Speeches from Fed members
- The Jackson Hole Economic Symposium later this month
These events will keep shining a light on the Fed’s policy path, which in turn can shape the future of Treasury yields and the U.S. dollar.
