US Dollar Rises as Powell Warns Against Premature Rate Cuts

Key Takeaways:

Fed Chair Jerome Powell struck a cautious tone on interest rate cuts, warning of risks to both inflation control and the job market.

Powell avoided signaling a clear move for the October FOMC meeting.

The US dollar index (DXY) climbed 0.24% to 97.45 following his remarks.

The US dollar strengthened on Tuesday after Federal Reserve Chairman Jerome Powell said policymakers must remain cautious on future rate cuts, highlighting the delicate balance between inflation and employment risks.

Powell noted that if cuts are too aggressive, inflation could remain elevated, forcing the Fed to raise rates again later. Conversely, if rates stay too restrictive for too long, the labor market could deteriorate. He refrained from offering any clear guidance on whether the central bank will move to lower rates at the October FOMC meeting.

Following Powell’s comments, the US dollar index (DXY) gained 0.24% to 97.45, reflecting renewed investor demand for the greenback as markets priced in uncertainty around the Fed’s policy trajectory.