The US dollar saw a slight increase as investors remained cautious due to softer-than-expected economic data. The dollar index, which measures the greenback against major currencies, rose by 0.15% to 103.50. This increase follows a significant drop in 10-year US yields after data showed weak business activity growth in August. In addition, European surveys revealed shrinking manufacturing output and declining services activity, affecting the euro. The pound also fell as British factory output slumped, pointing towards a potential recession. The uncertainty surrounding the economic outlook has led to caution among developed market central banks in terms of further tightening.

Traders are exercising caution ahead of the Federal Reserve’s Jackson Hole symposium, where Fed Chair Jerome Powell is scheduled to speak. Market participants are looking for direction as discussions surrounding stronger-than-expected data may indicate ongoing concerns about inflation. On the other hand, focus on a cooling labor market, weak Purchasing Managers’ Index (PMI) data, and downward trending Consumer Price Index (CPI) data may suggest that interest rates are nearing their peak. Meanwhile, the Turkish lira awaits the central bank’s rate decision for August, with expectations of a rate hike. However, there is uncertainty about the extent of the hike and its impact on the lira’s value.

The Chinese yuan remained steady against the dollar, supported by state-bank buying in recent sessions. However, analysts are looking for further guidance on the intentions of China’s monetary policy from the central bank’s statement. Overall, market sentiment remains cautious as investors await key economic data releases and speeches from central bank officials for a clearer picture of the global economic outlook and potential monetary policy changes.

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