Stagflation Signals Pressure Dollar
The US dollar index weakened slightly by around 0.15% to 99.80 on Wednesday (August 5th), remaining below the psychological 100 level for the fourth session. The dollar was pressured by signs of a labor market slowdown, but its decline was limited as service sector price pressures remained high.
ADP data showed that US private employers added only 44,000 jobs in July, lower than the estimated 70,000 and slower than the revised 95,000 figure in June. These results reinforced concerns that hiring momentum was losing steam ahead of the Nonfarm Payrolls (NFP) report.
The ISM Services PMI edged up to 54.1 from 54.0, but remained below the 54.5 forecast. Although the service sector continued to expand, the employment component fell to 47.4, entering contractionary territory. Conversely, new orders increased to 57.2, indicating that domestic demand remained quite strong.
The market is also closely monitoring the prices paid index, which rose from 67.7 to 70.3. This situation creates a stagflation-like signal: hiring is weakening, but corporate costs remain rising. Therefore, the market has not completely ruled out the possibility of the Fed raising interest rates again.
The next focus is on Friday's Nonfarm Payrolls (NFP) report. Consensus estimates the US economy added around 80,000 jobs in July, following 57,000 in June. However, the ADP and ISM employment components are not always accurate predictors of NFP, so market volatility is potentially high.
Newsmaker Analysis: The DXY remains bearish as long as it remains below 100.00–100.20, with support at 99.50 and 99.20. A weak NFP could extend dollar pressure and support gold, while a strong NFP or strong wage growth could lift the DXY back above 100. The surge in service prices also limits the potential for dollar weakness, as the Fed still has to contend with stubborn inflation. (arl)
Source: Newsmaker.id
