Dollar bounces: He Dollar The euro edged higher on Wednesday after hitting its lowest point this year against the euro, as traders awaited updates on U.S. jobs figures and a key speech by Federal Reserve Chairman Jerome Powell. The euro rose to $1.1132, its highest level since December, amid growing speculation about possible Fed rate cuts this year.
Bond yields affect Dollar
This sentiment helped push down US bond yields, putting pressure on the DollarThe euro then fell slightly to $1.1119 as the dollar regained some stability. Analysts have linked the drop in yields that makes US bonds less attractive and weighs on the dollar to current economic concerns and anticipation of revised US non-farm payrolls data.
The Bureau of Labor Statistics is due to publish updated figures for the period from April 2023 to March 2024 on Wednesday, based on fiscal data. Michiel Tukker, senior European rates strategist at ING, commented: “As inflation gradually aligns with targets, financial markets are increasingly wary of recession risks. A downward revision in the employment figures could trigger further risk aversion.”
Traders adjust bets on rates
A weaker payrolls report on August 2 had led traders to bet on a possible 0.5 percent rate cut by the Federal Reserve at its mid-September meeting. However, recent better economic data has changed expectations, with traders now pricing in a 28 percent chance of a larger cut. Dollar The index fell to its lowest level since late December at 101.30 but has since gained 0.12 per cent to 101.51. Sterling rose to its highest since July 2023 at $1.3054 but later retreated to $1.3019, down 0.1 per cent. Jane Foley, head of currency strategy at Rabobank, said the dollar’s fall lacked a clear explanation and suggested the market volatility could be because many traders were on summer holidays.
Jackson Hole Clock
Powell’s upcoming speech at the Kansas City Fed’s Jackson Hole summit on Friday will be closely watched for clues about the potential scale of future rate cuts and whether borrowing costs could be tightened at subsequent Fed meetings. Foley noted: “Recent moves in yields and the Dollar The dollar experienced volatility against the Japanese yen, initially falling 0.21 percent to 144.945 yen before recovering to 146.03 yen, up 0.55 percent.
Analysis of the rate hike in Japan
Traders will also be keeping a close eye on Japan’s special parliamentary session on Friday, where officials will review the Bank of Japan’s unexpected rate hike last month and its recent shift to a more hawkish stance.
BOJ Governor Kazuo Ueda’s testimony will be closely scrutinized, especially after recent dovish comments from Vice Governor Shinichi Uchida helped stabilize markets. A Reuters poll released on Wednesday showed more than half of economists expect the BOJ to raise rates again this year, with a December increase the most likely timing among those with a specific forecast. Dollar fell slightly from its one-month high of $0.6749, trading at $0.6737.(With contributions from Reuters)
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