US Dollar Index weakens to near 98.15 in Friday’s Asian session.
The softer job data reinforced expectations that the Fed will cut rates this month.
All eyes will be on the US August employment report later on Friday.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, edges higher to around 98.15 during the Asian session on Friday. The US August employment report will be the highlight later on Friday. This data could offer some hints about the US interest rate.
The number of Americans filing new applications for jobless benefits increased more than expected last week, consistent with softening labor market conditions. Additionally, US private sector employment rose by 54,000 in August, according to Automatic Data Processing (ADP). This figure followed a 106K (revised from 104K) increase seen in July and came in below the expectation of 65K.
Traders raise their bets that the US Federal Reserve (Fed) will cut rates this month, which undermines the DXY. Markets are currently pricing in a nearly 100% chance of the Fed cutting interest rates later this month, up from 87% a week ago, according to the CME FedWatch tool.
Federal Reserve Bank of New York President John Williams said on Thursday that he expects gradual interest rate cuts over time if the economy meets forecasts. However, Williams added that the central bank must balance inflation and job market risks right now. Meanwhile, Chicago Fed President Austan Goolsbee said on Friday that the US labor market might be deteriorating, adding that there is a bit of wait-and-see amid uncertainty.
Traders will take more cues from the US employment report for August, which is due later on Friday. The US economy is forecast to see 75,000 jobs added in August, while the Unemployment Rate is projected to edge up to 4.3% during the same period. The weaker-than-expected NFP print could lead to a bearish reaction in the US Dollar. On the other hand, a stronger-than-expected outcome could help limit the DXY’s losses as it raises the central bank’s scope to keep interest rates higher for longer.
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