US Dollar Edges Higher as Markets Await Warsh’s Jackson Hole Speech

Last Updated on 28/08/2026

The US Dollar has maintained a generally firmer tone this week amid relatively subdued market conditions. Higher US Treasury yields, combined with an oversold short-term technical backdrop, are providing support for the Greenback. The Dollar is also holding firm against the Japanese Yen, despite comments from a Bank of Japan Deputy Governor that appeared to reinforce expectations of a possible rate hike next month. So far, movements in US yields appear to have a stronger influence on USD/JPY than changes in Japanese rates.

Meanwhile, Russia and China have formally rejected participation in the US-led economic pressure campaign against Iran. Without their involvement in “Operation Economic Outcast,” Washington’s policy toward the conflict may provide a pathway for reducing its direct involvement. At the same time, the US appears to be increasing pressure on Canada, with Trade Representative Greer warning that some Canadian imports could face restrictions. Despite the escalating tensions, the Canadian Dollar has remained relatively resilient, falling around 0.25% this week and ranking around the middle of the G10 performance table.

Prices

G10

• EUR/USD: The Euro slipped to a five-day low near 1.1640 on Wednesday, roughly the midpoint of its rally following the US Treasury’s announcement that it would double its bond buybacks. The pair has remained below 1.1660 today and has edged slightly beneath Wednesday’s low during the European session. Technical support is seen around 1.1635 at the 200-day moving average, followed by the 1.1625 area near the 61.8% Fibonacci retracement.
• USD/JPY: The Dollar remained below Tuesday’s high around 159.50 against the Yen but still recorded its strongest close in six sessions near 159.30. The pair has marginally surpassed Wednesday’s high in European trading. The five-day moving average has crossed above the 20-day moving average for the first time since the July intervention. The market continues to appear willing to test the BOJ and US Treasury, despite growing expectations that the BOJ could raise rates twice before year-end. Higher oil prices and US yields may provide additional support. The August 18 high, just below 159.80, remains the key level above.
• GBP/USD: Sterling declined roughly 0.4% on Wednesday, marking one of its sharpest daily losses in a month. The pair fell to just below 1.3585, almost reaching the 61.8% retracement of its rally following the US Treasury’s bond-buyback announcement. Losses have continued today, with GBP/USD approaching 1.3570. Further technical support is seen around 1.3335–1.3360. Options worth GBP840 million at 1.3550 expire today.
• USD/CAD: The Canadian Dollar remains under pressure following the sharp deterioration in US-Canada trade relations. Consistent with historical correlations, CAD weakness has coincided with a widening Canada-US two-year yield spread, which reached 128 basis points on Wednesday, its widest level in nearly three weeks. USD/CAD climbed toward 1.3895 before holding below that level today. Initial resistance is located near last week’s high around 1.3910, followed by the 20-day moving average near 1.3920 and the 1.3950–1.3960 zone. Trade Representative Greer’s threat to restrict certain Canadian imports remains an additional source of pressure.
• AUD/USD: The Australian Dollar approached 0.7190 on Wednesday, its strongest level since June 1, before profit-taking pushed it back toward 0.7165. The five-day moving average is also located around this level, and the Aussie has remained above it for roughly two weeks. Stronger-than-expected Australian inflation data and robust household spending have reinforced expectations that the RBA could deliver another rate hike.

Emerging Markets

• USD/MXN: The Dollar traded on both sides of Tuesday’s range against the Mexican Peso but settled within it, leaving the near-term bias tilted slightly higher. Momentum indicators remain technically oversold after five consecutive weeks of declines. Rising US-Canada trade tensions may also increase concerns about the future of USMCA. USD/MXN has edged slightly above 16.99 today. A move above 17.00 would expose last week’s high just below 17.08, followed by the 20-day moving average near 17.10 and the 17.1365 area, corresponding to the 38.2% retracement of the Dollar’s decline from late July.
• USD/CNH: After closing below 6.72 on Tuesday for the first time in roughly three and a half years, the Dollar recovered and settled around 6.7225 against the offshore Yuan. The pair is consolidating near 6.72 today. The firmer Dollar appears to have encouraged the PBOC to set a slightly weaker reference rate, with the CNY fixing raised to 6.7840 from 6.7829.
• USD/INR: The Indian Rupee weakened as markets reopened following Wednesday’s holiday. Higher oil prices and a broadly stronger US Dollar weighed on the currency. The Rupee had gained around 0.35% on Tuesday, its strongest advance in nearly a month. USD/INR has rebounded toward 95.56 after reaching around 95.39 earlier in the week, with last week’s high slightly above 95.76.

Other Markets

US equities faced some pressure from higher yields and oil prices ahead of NVIDIA’s earnings, although the company’s results subsequently supported parts of the technology sector across Asia-Pacific markets. South Korea’s KOSPI gained around 1.5%, standing out among regional markets despite the central bank’s recent rate hikes. The benchmark rate now sits at 3%. In Europe, the technology-light Stoxx 600 was down around 0.4% during the morning session. Meanwhile, Nasdaq futures were up roughly 1%, while S&P 500 futures gained slightly less.

Benchmark 10-year government bond yields rose by around 3–5 basis points across the US and Europe on Wednesday. Yields remained broadly firmer today, with European rates rising 1–2 basis points and the US 10-year Treasury yield increasing around 2 basis points.

Gold ended a five-session winning streak with a sharp 1.3% decline on Wednesday, giving back more than two days of gains. The precious metal remained under pressure today, falling to a four-day low slightly below $4,579. If the recent rally was partly driven by the US Treasury’s bond-buyback announcement, the first corrective target could be around $4,555. Silver also appears vulnerable after encountering strong resistance near $70, although it remains within Tuesday’s trading range of roughly $67.45–$69.95.

October WTI crude recovered from a dip below $80, its first move under that level since August 14, before reaching an intraday high near $83.30 during New York trading. Oil remains above $80 today and is hovering around $82 ahead of the North American session. Last week’s high was close to $87.70.

Economic Data

The US economic calendar includes the preliminary goods trade deficit, retail and wholesale inventories, weekly Initial Jobless Claims, and the Kansas City Fed’s August manufacturing survey. The improvement in the US trade balance remains distorted by businesses bringing forward imports ahead of last year’s tariffs. Even so, the overall trade deficit narrowed to roughly $534.8 billion in the first half of 2026 from $716.6 billion in H1 2025 and $558 billion in H1 2024. Inventory figures typically have limited immediate market impact but feed into GDP estimates, alongside the real trade balance.

Weekly jobless claims continue to point to a relatively resilient labor market. The four-week moving average declined for five consecutive weeks through the end of July before edging higher to around 204,000 in mid-August.

Canada is scheduled to release its June establishment employment figures, although markets tend to react more strongly to the timelier household employment survey. Statistics Canada will also publish an estimate of the Q2 current account ahead of tomorrow’s preliminary GDP report. After remaining in deficit since Q2 2022, Canada’s current account is expected to have moved into surplus in Q2 2026. Following contractions in Q4 2025 and Q1 2026, the economy is expected to regain lost ground in Q2, with forecasts centered around 3.2%–3.4% annualized growth. However, the intensifying trade dispute with the US could weigh on growth later in the year.

Mexico will publish its July trade balance. The country’s external trade remains a relative bright spot, with the first-half trade surplus increasing to around $9.86 billion from $1.43 billion a year earlier. Exports rose 10.7% in H1, while imports increased 7.7%. The central bank recently raised its 2026 GDP growth forecast to 1.5% from 1.1% and slightly lowered its 2027 inflation projection.

Eurozone M3 money supply growth accelerated to 3.4% year over year in July from 3.3% in June, marking its fastest pace since June 2025. Household lending growth increased to 3.1%, while lending to non-financial corporations accelerated to 4.4%.

In Australia, stronger-than-expected CPI data was followed by evidence that higher interest rates have yet to significantly weaken household spending. Consumer spending jumped 1.1% in July, well above the 0.3% consensus forecast, while June growth was revised higher to 1.0%. Although private capital expenditure fell unexpectedly in Q2, the previous quarter’s increase was revised higher. Markets are now pricing in almost a 50% probability of an RBA rate hike next month, compared with just over 10% at the end of last week, while a hike before year-end is now fully priced in.

Japanese investors sold foreign bonds and equities last week after three consecutive weeks of buying. Foreign bond sales reached JPY1.98 trillion, the largest weekly outflow since early April, while foreign equity sales totaled nearly JPY870 billion, the biggest liquidation since early June.

China’s industrial profit growth slowed to 11.2% year over year in July from 15.1% in June, marking the third consecutive monthly slowdown. However, the headline figure masks a notable divergence, with the high-tech sector continuing to account for more than half of year-to-date profit growth.