The U.S. dollar index edged up 0.1% to 98.71, near a two-week high, as markets reassessed the probability of a September rate cut. A firmer dollar makes gold more expensive for holders of other currencies, pressuring the metal lower. The euro and British pound both slipped to their weakest levels since early August, while the yen weakened to 148.56 per dollar.

UBS strategist Giovanni Staunovo attributed the dip in gold to the firmer dollar and increasing uncertainty around the Fed’s next move. Futures markets, using CME’s FedWatch tool, show a 71-73% chance of a 25-basis-point rate cut in September—down from 85.4% just one week ago.

Mixed Fed Messaging Keeps Markets on Edge

Federal Reserve officials sent conflicting signals this week. Some expressed caution about easing policy too soon, while others left the door open for a rate cut. Chicago Fed President Austan Goolsbee referred to the upcoming FOMC meeting as “live,” while emphasizing mixed data and inflation concerns.

Labor market data remains soft, with last week’s jobless claims rising the most in nearly three months. But inflation remains above the Fed’s 2% target, adding to policy uncertainty. Powell’s speech at 10:00 a.m. EDT is expected to clarify how the Fed will balance inflation risks against a cooling labor market.

Treasury Yields Hold Steady as Market Awaits Fed Guidance