US Dollar Index: DXY Falls Towards 104.00 As Markets Prepare For Fed's Preferred Inflation And US NFP Data

US Dollar Index (DXY) accepts bids to re-establish its intraday low near 104.10 as it retreats from its highest level since June 01, marked the day before, amid cautious optimism on the market. In spite of this, China's stimulus combines with apprehension ahead of this week's top-tier inflation and employment data from the US to support the dollar's pullback against the six major currencies. Nonetheless, hawkish comments from Fed Chair Jerome Powell and a technical breakout give DXY investors reason for optimism.

Powell reiterated his defence for "higher for longer" rates while stating that the policy is restrictive but that the Fed is unsure of the neutral rate level. In addition to stating that considerable additional ground must be covered to return to price stability, the policymaker stated that economic uncertainty necessitates flexible monetary policymaking.

In addition, Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, appeared hawkish while stating that under-tightening would be worse than over-tightening. The policymaker added, "Rates are getting close to where they should be."

In addition, the president of the Federal Reserve Bank of Philadelphia, Patrick Harker, told Bloomberg that he does not see the need for additional rate hikes at this time, but he could call for additional hikes if the inflation decline stalls.

Notable is the contrast between the softer US Purchasing Managers Index and Michigan Consumer Sentiment Index readings and the muddled Durable Goods Orders, mid-tier activity data, and inflation expectations readings. However, hawkish remarks made by Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium aided the US Dollar Index (DXY) in posting its fifth consecutive weekly gain and touching a three-month high.

On a separate page, China's halving of the stamp duty on stock trade, hopes of no significant negatives from US-China trade talks, and China Premier Xi Jinping's dislike of Western-style growth measures appear to support sentiment recovery and weigh on the DXY.

The benchmark 10-year Treasury bond yields snapped a four-week uptrend by posting modest weekly losses and retreating from the highest level since 2007, before posting a corrective rebound to 4.25 percent at the latest. Wall Street ended the previous day on a positive note, but S&P500 Futures struggle to establish clear directions.

The preferred inflation gauge of the Federal Reserve (Fed), namely the Core Personal Consumption Expenditures (PCE) Price Index for July, and the monthly employment data will be crucial for determining the direction of the US Dollar Index moving forward.