US Dollar Stagnates, Inflation and Interest Rates in Focus

The US dollar has remained stable for a month, with the Dollar Index (DXY) near 99. The Federal Reserve's rates are held at 3.50%–3.75%, while August producer inflation reached 5.4% year-on-year. The US added 162,000 jobs last month, and Brent crude prices are above 100 dollars. This situation supports the Fed's aggressive stance. Other central banks are also adjusting rates; the ECB raised its deposit rate to 2.50%, and the Bank of Japan is expected to increase rates to 1.25% next week. US-Japan intervention has strengthened the yen from nearly 164 per dollar in July to around 155. High US rates are less impactful as yields rise globally. The US is facing a deficit of approximately 1.8 trillion dollars through the first 10 months of fiscal 2026. A weaker dollar increases costs for imports and foreign travel, while a stronger dollar can reduce imported inflation. The market is divided, with futures indicating about 70% odds of a Fed rate hike next week, while a Reuters poll shows 70% of economists expect no change. The weekly chart remains neutral, with a close above 101.98 strengthening the bullish case, and below 97.63 indicating a broader downtrend. The daily chart shows weakness, as DXY broke its rising trendline in August and faces resistance around 100–100.60. The upcoming US CPI report on Friday is expected to show 3.4% annual inflation, followed by the Fed meeting on September 15–16 and the Bank of Japan on September 17–18. The dollar's stagnation may soon lead to a decisive movement.

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