The US Dollar Index stops paying for hawks who cannot vote

The US Dollar Index has stopped being influenced by the speeches of regional Federal Reserve presidents who cannot vote. On Tuesday, a non-voting regional president issued a conditional hold, tying the current target range to continued evidence that inflation is decreasing. However, the Dollar Index has remained unchanged as a result.

The index is currently trading just beneath the 99.00 handle after a European morning high and the American session band has remained narrow since 13:00 GMT. This lack of movement is not due to a waiting period for a catalyst, but rather because the market has stopped paying attention to the speeches. Four regional presidents who hold votes this year, located in Cleveland, Philadelphia, Dallas, and Minneapolis, have already dissented twice.

The minutes released last week further increased the chorus without widening the tally. The market has priced in a near-zero gap between stated hawkishness and recorded votes. The speaking calendar has lost its functionality as a Dollar input, and futures now indicate a one-in-three chance of a September increase, down from roughly two-thirds after the July meeting.

The path to the increase has been through data rather than podium commentary. Tuesday's releases, such as a decline in new home sales and rising inventories, have contributed to the bearish trend. Long-term yields have remained stable around 4.70% for the 10-year and 5.25% for the 30-year, indicating that the Dollar is not being sold due to a funding scare.

Instead, it is being sold because the marginal reason to own it has been repriced away. The Treasury Secretary recently unveiled an economic package for Iran, but it lacks secondary measures aimed at third countries and is described as a warning shot. Escalation in the Strait of Hormuz has not affected the Dollar exchange rate. On Wednesday, the Personal Consumption Expenditures (PCE) price index for July will be released, followed by the second cut of second-quarter GDP.

The chair's keynote at Jackson Hole and the preliminary annual benchmark revision to nonfarm payrolls are scheduled for Friday, which will determine the week's outcome.