US Dollar Forecast: Weakens Below 50-Day as CPI, PPI Stir Policy Doubts Ahead of Jackson Hole

Dollar Index Slides as Rate Cut Bets Hold Firm Ahead of Jackson Hole

The U.S. Dollar Index settled lower on Friday, slipping just beneath the 50-day moving average at 98.100— a key technical marker that’s been capping recent rallies and controlling short-term direction.

While the dip signals active sellers overhead, the main swing chart remains bullish, showing a pattern of higher tops and higher bottoms. That structure suggests the broader bias is still up, but traders are clearly waiting for a stronger catalyst to commit on either side.

CPI, PPI Fuel Fed Confusion

Last week’s CPI and PPI reports delivered a mixed message, reinforcing the market’s growing unease with the Fed’s next move. Consumer prices pointed to some cooling, but Thursday’s hotter-than-expected jump in producer prices briefly reignited fears of sticky inflation. Still, the dollar gave back its Thursday gains on Friday, finishing the week down 0.5% against a basket of currencies.

The pullback didn’t shift rate expectations much. According to CME’s FedWatch Tool, money markets still reflect a 93% probability of a 25-basis-point rate cut in September — and many economists expect another cut before year-end. A slowing economy and lingering tariff-related inflation pressures are keeping the door wide open.

Fed Comments and Data Leave Market Guessing

Chicago Fed President Austan Goolsbee flagged services inflation as a concern, particularly with tariffs creating what he described as a “stagflationary impulse.” At the same time, U.S. import prices rose in July, and retail sales were strong — helped by promotional activity from major retailers — sending mixed signals on the consumer side.

Treasury yields ticked higher following Friday’s data, with the 10-year rising 3 basis points to 4.32%. But even with stronger yields, the dollar found little support into the weekend. Most traders now look to this week’s Jackson Hole symposium, where Fed Chair Jerome Powell is expected to clarify how the central bank plans to manage inflation risk without derailing growth.

Market Outlook

Until then, dollar bulls may stay cautious. Despite slipping under the 50-day moving average, the swing structure with higher tops and higher bottoms remains valid, which signals the trend hasn’t broken — just stalled. The market is likely in wait-and-see mode until Powell speaks.

Bottom line: The dollar is still consolidating. Traders are looking for clarity, not momentum. If Powell signals patience or flags inflation uncertainty, it could tilt the odds further in favor of a cut. Until then, positioning stays defensive.

More Information in our Economic Calendar.