Dollar Weakens, Markets Prefer 25-bps Scenario
The US dollar weakened on Friday after a surge in jobless claims and a moderate rise in inflation made markets increasingly confident that the Fed would cut interest rates next week—and possibly further thereafter. The dollar index stood at 97.585, heading for a second straight weekly decline after snapping a two-day rally on Thursday.
Thursday's data showed the largest weekly increase in jobless claims in four years, overshadowing the August CPI release, which rose the fastest in seven months but remained moderate and in line with expectations. Some market participants called the current situation a "crossroads" due to the mixed data signals.
The 10-year Treasury yield edged up to 4.0282% from 4.011%, after briefly approaching the 4% threshold. Fed funds futures have almost fully priced in a 25-bps cut by September 17, while bets for a 50-bps cut have thinned; the market now sees a shallower easing path through the end of the year.
In the forex market, USD/JPY was flat at 147.27 following a joint US-Japan statement that emphasized market-determined exchange rates and rejected excessive volatility. EUR/USD was at $1.1727 (-0.1%) as the ECB held interest rates at 2% and assessed more balanced economic risks. The AUD strengthened 0.1% to $0.6665, the NZD fell 0.1% to $0.5971, and the GBP was at $1.3572 (-0.1%), while the offshore yuan was flat at 7.1135 per dollar.
Key points
US jobless claims surge: a sign of labor market weakness.
August CPI "tepid" but in line with expectations → boosting the possibility of a 25 bps rate cut.
10-year yield around 4.03%; the Fed's easing path is expected to be shallower.
DXY 97.585, heading for a second weekly decline; USD/JPY stable, EUR under pressure, AUD relatively strong. (ayu)
Source: Newsmaker.id
