Market News
Dollar hits lowest since end-July ahead of US jobs data - REUTERS
Summary
- US dollar index hits 5-week low ahead of US data
- Robust figures could challenge current Fed rate cut expectations
- Trade policy and Fed independence still in focus
- Yuan underpinned by central bank fixings, Chinese stock rally
Sept 1 (Reuters) - The dollar hit a 5-week low on Monday as investors looked ahead to a raft of U.S. labour market data this week that could affect expectations for the Federal Reserve's monetary easing path.
Traders were also assessing Friday's U.S. inflation figures and a court ruling that most of Donald Trump's tariffs are illegal, as well as the U.S. president's ongoing tussle with the Fed over his attempt to fire Governor Lisa Cook.
Money markets have recently priced an around 90% chance of a 25-basis-point Fed rate cut in September and around 100 bps of easing by autumn 2026, according to the CME FedWatch tool.
Against a basket of currencies, the dollar eased 0.22% to 97.64 , after hitting 97.552, its lowest level since July 28. It clocked a monthly decline of 2.2% on Friday.
Investors will be focussed on Friday's U.S. nonfarm payrolls report, which will be preceded by data on job openings and private payrolls.
Analysts said the U.S. economy is no longer outperforming as it did for much of the past decade, justifying a weaker dollar, and further signs of a softening labour market are expected to bolster that narrative.
"Severe weakness (in economic data) would point to an even more forceful Fed response than market pricing predicts, but if May/June weakness is revealed as a statistical mirage, rate cuts would seem unwarranted given the almost certain prospect of rising inflation over the next year or so," Societe Generale economist Klaus Baader said.
Some analysts still see the chance of a 50-bp move by the Fed later this month.
The euro was up 0.35% to $1.1724, while sterling edged 0.18% higher to $1.3528. U.S. markets are closed for a holiday on Monday.
Political risks are in focus as the French government faces likely defeat in a confidence vote over plans for sweeping budget cuts.
Analysts noted that such risks tend to weigh on the currency only when there are clear signs of contagion within the euro area, something that is not evident at the moment.
