Last Week’s Movement (August 4–8, 2025)
The DXY hovered around 98.5 after rebounding from its drop following a disappointing Nonfarm Payrolls (NFP) report. Market sentiment was supported by better-than-expected S&P Global Composite and Services PMI data, although the ISM Services PMI fell to 50.1, indicating declining demand and slower hiring.
On Thursday (August 7), the dollar remained capped around 98.13, driven by strong expectations for a Fed rate cut (around a 94% probability) and rising political uncertainty, including Trump’s intervention in the Fed and economic data agencies.
Conclusion: Overall, the DXY moved mostly sideways last week, with slight downward pressure from rate-cut speculation and political uncertainty.
This Week’s Outlook (August 11–15, 2025)
Based on current fundamental data and sentiment, the potential DXY movement this week is as follows:
Rate-Cut Pressure (Fed)
The odds of a 25 bps cut at the September Fed meeting have sharply risen (~94%), which tends to weigh on the DXY.
Investor Skepticism Toward Fed Neutrality & Data Reliability
A Reuters survey (August 1–5) showed analysts expect the dollar to continue weakening due to concerns over Fed independence, data reliability, and rising fiscal debt.
Bearish Market Positioning
Morgan Stanley projects a 9% drop in the DXY over the next year, suggesting ongoing downward pressure.
Bank of America and other investment managers note the most extreme short-dollar positions in two decades, reflecting strong negative sentiment.
Gold & Other Safe-Haven Risks
Flows into gold as a safe-haven suggest investor preference for non-dollar assets (not directly included in the DXY but influencing currency perceptions).
Weekly Projection:
A moderate DXY decline is likely, with potential movement toward 98.0 or even approaching 97.5 if rate-cut sentiment strengthens and domestic data remains weak.
However, a “surprise” such as stronger-than-expected economic data or hawkish Fed comments could stabilize the DXY or trigger a mild rebound—though this is seen as less probable.
| Aspect | Impact on DXY This Week |
|---|---|
| Fed Cut Expectations (Sep) | Downward pressure |
| Political Conditions & Data | Distrust weighs on dollar |
| Market Sentiment (Short) | Adds to downside risk |
| Safe-Haven Rotation | Slight dollar support |
| Rebound Risk | Low, depends on surprises |