USD Index Rebounds as Hawkish Fed Chair Warsh Revives Rate Hike Bets

The US dollar staged a broad recovery in the week ended August 28, reversing prior losses as new Federal Reserve Chair Kevin Warsh delivered a notably hawkish debut speech at the Jackson Hole symposium. Warsh's emphasis on restoring price stability and his reluctance to endorse near-term easing prompted markets to reprice the Fed path, with participants lifting odds of a future rate hike and trimming expectations for 2026 cuts. The shift lifted front-end Treasury yields and tightened financial conditions, driving demand for the greenback across the board. EUR/USD retreated from recent highs, GBP/USD slipped as UK lending data softened, and USD/JPY firmed on the widening yield differential, while commodity currencies including AUD/USD and NZD/USD underperformed on reduced risk appetite. Gold surrendered much of its Treasury-led gains as real yields climbed. Technically, dollar strength remains contingent on rate expectations holding; a sustained hawkish narrative keeps the greenback's near-term bias higher, while any softening in upcoming US inflation or payrolls data would quickly challenge the rebound and revive downside risk.