1 day ago
Dollar slips as traders weigh Fed hike odds, jobs data
The U.S. dollar weakened a little on Monday.
Traders are waiting for an important U.S. jobs report on Friday.
They expect companies to have added about 55,000 jobs in August.
A strong Federal Reserve official, Kevin Warsh, said interest rates might need to rise further if inflation does not fall enough.
His comments made traders more likely to expect a rate increase in September.
However, weak job numbers could make a rate increase less likely.
The euro and British pound both rose slightly against the dollar.
The Japanese yen also gained after comments suggesting Japan might support it and possibly raise interest rates.
The dollar index fell 0.24% to 99.43 in subdued Monday trading.
Fed funds futures priced in a 64% chance of a September rate hike, up from about 35% before Kevin Warsh’s remarks.
Economists polled by Reuters expect U.S. employers added 55,000 jobs in August.
The euro rose 0.27% to $1.1615, while sterling gained 0.07% to $1.3544.
The yen strengthened 0.2% to 159.77 per dollar after Scott Bessent suggested Japan could take steps supporting the currency.
- Who
- Currency traders, the Federal Reserve, Kevin Warsh, Japanese officials and U.S. Treasury Secretary Scott Bessent.
- What
- The dollar edged lower as markets reassessed the chances of a September U.S. interest-rate hike and awaited August jobs data.
- Where
- Foreign-exchange markets, with developments involving the United States and Japan.
- When
- Monday, August 31; the jobs report is due Friday, and the Fed meets September 15-16.
- Why
- Warsh’s comments increased expectations of tighter U.S. monetary policy, while upcoming employment and inflation data could influence the Fed’s decision.
Rate-Hike Caution
Rate-Hike Support
Impact of employment data
Rate-Hike Caution
Marc Chandler said an outright decline in jobs would make a Federal Reserve rate increase unlikely, particularly after back-to-back job losses.
Rate-Hike Support
Traders increased the probability of a September rate hike after Kevin Warsh’s comments, despite uncertainty about the upcoming jobs report.
Inflation policy
Rate-Hike Caution
Weak hiring could reduce the case for further tightening because it would signal greater weakness in the economy.
Rate-Hike Support
Warsh said policymakers need confidence that inflation is moving toward 2% and indicated that further tightening may be needed to curb price pressures.
Key facts
- Dollar index
- Down 0.24% at 99.43; it remained on track for a second consecutive monthly decline.
- September hike odds
- Fed funds futures priced in a 64% chance, compared with about 35% before Warsh’s Friday remarks.
- Expected August hiring
- Economists polled by Reuters expect employers to have added 55,000 jobs.
- Euro
- Up 0.27% at $1.1615.
- Sterling
- Up 0.07% at $1.3544.
- Japanese yen
- Up 0.2% at 159.77 per dollar after falling beyond 160 on Friday.
- Upcoming inflation data
- Producer-price data is scheduled for September 10 and consumer-price data for September 11.
Quotes
Elwin de Groot
Head of macro strategy at Rabobank
“If we get an outright decline in jobs, I don't see how the Fed can raise interest rates. I don't think that they've ever raised interest rates after the economy had back-to-back job losses.”
livemint.com
“Warsh's prepared remarks seemed designed to lift rate-hike expectations, rebalance the September debate towards the hawks and rebuild his inflation-fighting credibility.”
livemint.com
Sources
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