Dollar Weakens Ahead of Revised US Employment Data
The US dollar weakened slightly on Tuesday ahead of the release of revised US employment data. The Bloomberg Dollar Spot Index fell 0.1% after falling 0.7% in the previous two sessions. Investors await the Bureau of Labor Statistics report, which is expected to show weaker US job growth over the past year than the current official figure.
The dollar's weakness boosted a number of major currencies. AUD/USD rose 0.3% to 0.6609 on the back of technical buying, while EUR/USD strengthened 0.1% to 1.1774 amid French political uncertainty after Prime Minister Francois Bayrou lost a confidence vote. GBP/USD also rose 0.2% to 1.3573. Meanwhile, USD/JPY fell 0.4% to 146.92 after Japanese politician Kono Taro called for a BOJ interest rate hike to support the yen.
Markets are now focused on the possibility of a more aggressive Fed rate cut. Analysts believe that if payroll revisions show significant weakness, the chances of a cut of up to 50 basis points could increase. Currently, overnight swap rates are pricing in a roughly 14% chance of a 50-bps cut at the September 16-17 FOMC meeting.
Furthermore, the yield on the 2-year US Treasury bond rose only slightly by 1 bps to 3.50%, reflecting the continued high uncertainty surrounding the Fed's policy direction. This week's revised employment data, along with PPI and CPI inflation figures, are expected to be key factors in determining the dollar's short-term movement. (ayu)
Source: Bloomberg
