USD struggles near post-NFP lows – BBH

US Dollar (USD) is trading at the lower-end of the tight range carved-out since Friday’s post-NFP low, BBH FX analysts report.

Full hit on the US economy from tariffs has yet to come

"The US economy is teetering on the edge of stagflation, a backdrop that will undermine USD. The ISM July reports showed services activity is near stall speed and manufacturing activity contracting at its fastest pace since October 2024. In parallel, the price index for both the services and manufacturing sectors point to upside risk to inflation."

"Meanwhile, the full hit on the US economy from tariffs has yet to come. The actual effective US tariff rate based on customs duty revenue as a percentage of the value of goods imported was 8.8% in June. Looking ahead, the average effective US tariff rate is estimated to rise to 18.3% as of August 1 - the highest since 1934. Higher US tariffs is a downside risk to growth and upside risk to inflation."

"Today, Fed Governor Lisa Cook and Boston Fed President Susan Collins (FOMC voter) participate in panel discussion (2:00pm New York, 7:00pm London) while San Francisco Fed President Mary Daly (FOMC non-voter) speak at an economic summit (4:10pm New York, 9:10pm London). We doubt the comments will meaningfully alter rate expectations. Fed funds futures more than fully price-in 50bps of Fed funds rate cuts by year-end to a 3.75-4.00% range."