The US Dollar Index hovers near a two-week high, with the market awaiting the US August non-farm payroll report
The US Dollar Index edged slightly lower near a two-week high, with the market focusing on the US August non-farm payrolls report, which will impact the Fed's interest rate cut decision in September. Analysis indicates that if the number of new jobs exceeds 150,000 and the unemployment rate falls to 4.2% or below, it will enhance confidence in an economic soft landing and solidify expectations of a rate cut. Currently, the market expects a higher probability of a 25 basis point rate cut, but the probability of a 50 basis point cut is 33%
According to the Zhitong Finance and Economics APP, as investors shift their focus to the US August non-farm payroll report to be released this Friday, the US dollar index edged lower on Monday but remained near a two-week high. With the Federal Reserve shifting its focus from fighting inflation to preventing the job market from cooling too quickly, this latest US non-farm payroll report is crucial. Analysts say that this employment data will determine the extent of the Fed's rate cut in September.
Last week, after Federal Reserve Chairman Powell signaled an imminent rate cut in September, the US dollar index fell to a low of 100.51 for the first time since July 2023. However, the US dollar index has rebounded recently, supported by lower-than-expected inflation data, and US GDP data showing a solid economic foundation, enough to make the Fed less aggressive in easing monetary policy. At the time of writing, the US dollar index was at 101.62.
In recent weeks, the market has largely priced in the expectation of a 25 basis point rate cut by the Fed in September. Meanwhile, traders currently see a 33% chance of a 50 basis point rate cut by the Fed in September, slightly lower than 36% a week ago.
Economists expect that the US non-farm payrolls for August will increase to 165,000, higher than July's 114,000, while the unemployment rate is expected to slightly decrease from 4.3% in July to 4.2%. IG analyst Tony Sycamore said, "If the US non-farm payrolls for August increase by 150,000 or more, and the unemployment rate falls to 4.2% or below, this will enhance confidence in a soft landing for the US economy." He added that this would reinforce expectations of a 25 basis point rate cut by the Fed in September.
In addition to the US August non-farm payroll report, other economic data to be released this week include the US August ISM Manufacturing Index on Tuesday, and the "mini non-farm" US August ADP Employment Report on Thursday. Furthermore, the "three key figures" of the Federal Reserve, FOMC permanent voters, New York Fed President Williams, and Fed Governor Waller will deliver speeches this week