The dollar index rose on Friday, driven by hawkish remarks from Fed board member Christopher Waller, who expressed concern about inflation running softer, signaling the potential for a 25bp rate cut in the near future. Waller’s comments tempered earlier gains in the dollar, particularly as Treasury yields slipped by 1-3 basis points across maturities. Fed Governor Michelle Bowman echoed a more cautious tone, favoring a 25bp cut over a more aggressive 50bp reduction, as inflation remains above the 2% target. Ongoing global central bank actions, including the Bank of Japan's dovish stance, also contributed to the yen's broad decline, as BOJ policies continued to weigh on the Japanese currency.

Market outlook remains cautious as investors digest the potential for further Fed rate cuts while balancing global central bank actions. U.S. Treasury yields slightly declined, with the curve steepening, indicating markets are preparing for a less aggressive monetary easing cycle. The stock market experienced a mild pullback, with the S&P 500 down 0.19% as investors paused to consolidate after the recent Fed rate cut. Commodities saw mixed action, with WTI rising 0.31%, continuing its recent upward trend, while copper dipped 0.45%, retreating from a two-month high. Gold surged 1.28%, driven by geopolitical tensions in the Middle East and demand for safe-haven assets as the yuan strengthened.

The currency summary shows the dollar continuing to gain ground against the yen, as USD/JPY surged 0.94% amid broad yen selling following the BOJ’s policy meeting. The euro remained flat, struggling to gain momentum as market participants focused on global monetary divergence. GBP/USD edged higher by 0.21%, supported by a stronger pound, while the loonie finished lower after Canadian retail sales rose in July, but PPI data showed a decline in August. The Australian dollar dipped slightly by 0.09%, reflecting the impact of falling commodity prices and global risk sentiment.

Looking ahead, the currency outlook is shaped by diverging global monetary policies and geopolitical risks. The U.S. dollar may remain supported by expectations of gradual Fed rate cuts, particularly if inflation trends continue to soften. The yen is expected to face further pressure due to the BOJ’s continued dovish stance. Meanwhile, the pound could see upward momentum if UK data points to more resilient economic performance, while the euro may remain range-bound, depending on upcoming ECB policy cues. Commodity-linked currencies like the loonie and Aussie dollar will likely be influenced by global demand for resources, with gold continuing to benefit from risk-off sentiment and geopolitical tensions.