It has been a relatively quiet day for currencies as North America enjoys an extended holiday. On Monday, the dollar slipped slightly but remained close to its highest level in nearly two weeks, with market attention turning towards an important US jobs report set for release this Friday.
The upcoming payroll figures are highly anticipated following Federal Reserve Chair Jerome Powell’s recent shift from combating inflation to focusing on preventing job losses. Analysts suggest that the job data will be crucial in determining the size of the Federal Reserve’s expected rate cut.
Economists forecast an addition of 165,000 jobs in the U.S. for August, up from a gain of 114,000 in the previous month. Analysts believe that job figures around this consensus could support a soft landing and lead the Fed to ease its policy by 25 basis points this month.
Currently, traders see a 33% probability of a 50-basis point rate cut by the Fed this month, with a quarter-point already fully priced in. A week earlier, expectations were 36% for the larger reduction.
Earlier, the dollar had strengthened, reaching its highest point since late August, driven by a rise in long-term Treasury yields to levels not seen since mid-August. This increase in yields came as inflation data indicated a smaller expected rate cut, while US GDP figures showed the economy’s resilience, giving the Fed more flexibility in its policy adjustments.
The dollar index (DXY) weakened by 0.08% to 101.67, down from a recent high of 101.79, a level not seen since August 20. The euro appreciated by 0.2% to $1.1060, recovering from a low of $1.1043, its weakest since August 19.
The dollar rose by 0.40% to 146.74 yen, though some analysts argue that further dollar gains against the yen might be limited if the Fed proceeds with rate cuts.
Treasury bonds were not traded on Monday due to the US holiday, but the 10-year yield was at 3.9110% following a 4.4 basis points increase on Friday.
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