Dollar: Warsh Speech to Impact Dollar and U.S. Treasuries — BNY Mellon

Analysts at BNY Mellon, led by Geoff Yu, noted that the market is closely watching Kevin Warsh's first speech at the Jackson Hole symposium, as his policy stance could significantly influence the trajectory of the dollar and U.S. Treasuries. Meanwhile, the upcoming July PCE data is widely seen as a key precursor for determining the U.S. rate path and dollar direction. The dollar index is currently trading near 99.01, with market sentiment turning cautious ahead of key data and official remarks.

**Long-End Treasury Volatility Intensifies, Term Premium in Focus**

The report specifically highlighted uncertainty in the long-end Treasury market. Recently, the 30-year Treasury yield briefly rose above the 5% threshold, hitting its highest level since 2007, and although it subsequently pulled back, volatility has risen notably. This reflects deeper market concerns over U.S. fiscal credibility and inflation control strategies. Analysts believe any signals from Warsh regarding the Federal Reserve's balance sheet and inflation management could directly trigger sharp steepening moves in long-end yields and a repricing of the term premium.

**PCE Data as Short-Term Bellwether, Canada GDP Impact Limited**

On the macro narrative front, the July PCE inflation data carries significant weight. The market is seeking clues from this data on the Fed's next steps, especially with Warsh's policy framework still unclear. If inflation data proves sticky, combined with Warsh's credibility-focused policy stance, it could reinforce expectations of "higher rates for longer," providing short-term support for the dollar. However, the report also noted that Canada's GDP data from the same period is unlikely to shift the broader North American macro narrative, with market focus remaining firmly on U.S. policy and data.