The US Dollar (USD) has shown notable strength against major currencies, driven by firm expectations that the Federal Reserve (Fed) will deliver additional interest rate hikes this year [1][3]. At press time, the US Dollar Index (DXY), which measures the Greenback against six major currencies, is trading 0.1% higher near 101.25 according to one source [1], and 0.15% higher near 101.33 according to another [3]. The DXY is close to its two-month high of 101.40 posted last week [1].
Currency heat maps from both sources indicate the USD was the strongest against the Australian Dollar, with a gain of 0.41% to 0.43% depending on the source [1][3]. The USD also gained 0.14% to 0.15% against the British Pound (GBP) and 0.02% against the Japanese Yen (JPY) [1][3]. The GBP/USD pair is down 0.15% at around 1.3234, reflecting pressure on the Pound as the USD trades firmly ahead of the US JOLTS Job Openings data for August, which is expected to show 7.23 million fresh jobs, slightly lower than July's 7.271 million [3].
Market sentiment is being shaped by expectations for Fed policy. The CME FedWatch tool indicates a 70% probability of a rate hike at the October meeting and a 60% probability of a quarter-point hike at each of the two remaining policy meetings this year [1][3]. TD Securities expects the Fed to hike two more times, in October and January, citing persistent inflation above target and a robust labor market [1]. Fed’s Cook delivered a slightly more hawkish tone, highlighting continued inflation pressure from artificial intelligence and geopolitical risks, and stated that the labor market is “well positioned” to absorb further rate increases [2].
In the currency markets, USD/JPY is trading around 157.30, testing support at the nine-day EMA of 157.24, with resistance at the 50-day EMA of 158.02 and the upper boundary of a symmetrical triangle at 158.90 [2]. A break above this range could see the pair revisit the nearly 40-year high of 163.99 reached on July 23, while a break below could expose the 11-month low of 152.10 [2]. Speculative positioning in the Yen has shifted, with JPY net longs decreasing sharply from 120,000 to around 72,000, indicating cooling investor sentiment [2].
For the British Pound, analysts at HSBC note that markets are pricing in around 100 basis points of tightening from the Bank of England by July 2027, but warn that higher energy prices and weak growth momentum create a challenging policy mix, leaving the Pound vulnerable [3]. GBP/USD remains under a bearish bias, trading below its 20-period EMA at 1.3373 [3].
CONCLUSION
The US Dollar is gaining strength on the back of strong expectations for further Fed rate hikes, pressuring both the Japanese Yen and British Pound. Market sentiment remains hawkish for the USD, with technical and positioning data supporting further gains. Upcoming US economic data and central bank decisions are likely to remain key drivers for currency markets.