USD Lower Following NFP
The US Dollar is starting the week on a softer footing as traders digest Friday’s report and look ahead to a slew of key US data to come. The August NFP was seen falling to just 22k, down sharply from the upwardly revised 79k reading seen in July and well below the expected 75k level reading. With jobs growth anaemic, expectations of a September rate-cut have risen again, now standing around 90%. Pricing for further easing ahead of year end has risen also with a follow up cut in October priced at 75% and an additional December cut around 70%.
Fed Guidance
At the latest FOMC meeting Fed chair Powell acknowledged the risks to the US economy from a weaker jobs market but voiced some concern around lingering inflation risks. As such, incoming data this week will be closely watched. Tuesday will see the release of the latest PPI figures before Thursday’s headline CPI release and, finally, the latest UoM sentiment data on Friday.
US Inflation Due
Looking to Wednesday’s CPI release, the market is expecting annualised inflation to rise to 2.9% from 2.7% in August. If seen, this could cause some softening of rate-cut expectations later in the year but shouldn’t impact a cut in September. On the other hand, if CPI undershoots forecasts, this should see a jump in easing forecasts leading USD firmly lower into the September FOMC.
Technical Views
DXY
For now, DXY remains congested around the 98 level and with momentum studies weakening, risks of a further drop down towards the 96.89 level are seen. If broken, 94.85 will be the deeper level to watch. Bulls need to see price back above the 99 level to alleviate near-term downside risks.
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