U.S. Dollar Index Holds Near Flat at 100.85 as Fed Policy Outlook Shifts

On Monday (July 7), the U.S. dollar index (DXY) held nearly flat at 100.85, as markets reassessed Federal Reserve policy prospects following last week's weaker-than-expected U.S. jobs report. The report sparked a 0.5% drop in DXY on Thursday, prompting traders to lower rate-hike expectations and focus on the likelihood of stable policy going forward.

Fed Chair Kevin Warsh has signaled the central bank will abandon forward guidance and focus on inflation control, noting the labor market remains resilient. Oil prices, which have retreated to levels before February's U.S.-Israel operations against Iran, have also eased inflation concerns. Macquarie strategist Thierry Wizman noted that while lower oil prices typically weaken the dollar, the market's repricing of Warsh's hawkish stance may now be complete, suggesting dollar strength could stall. The yen weakened again, with USD/JPY rising 0.4% to 162.04, while EUR/USD edged higher to 1.1443.