Friday’s job market indicators were mixed, and the U.S. dollar fell close to a one-week low against major peers. This came before crucial monthly payrolls data later in the day, which almost certainly will set the pace of Federal Reserve policy easing.
As of 0015 GMT, the dollar index, which compares the currency to a basket of six important counterparts, was steady at 101.03, after touching 100.96 for the first time since August 29. Overnight, the index dropped about 0.2 percent. It has dropped close to 0.7 percent for the week.
According to a report released on Thursday, despite the low number of layoffs, fewer Americans submitted new applications for unemployment benefits last week. That eased concerns that the labor market was rapidly deteriorating, as the previous day’s data revealed that private job growth fell to a 3-1/2-year low in August.
Before Friday’s payrolls report, traders are left guessing due to the mixed data. Reuters surveyed economists predicted a 165,000-job increase in August, up from 114,000 in July.
When Governor Christopher Waller and New York Fed President John Williams each take the stage in the final Fedspeak before the blackout period begins prior to this month’s policy gathering, it will be almost immediately clear what the Fed makes of the numbers.
According to the CME Group’s FedWatch Tool, traders currently see 40% odds for a supersized 50-basis point (bp) Fed interest rate cut on Sept. 18, compared to 60% odds for a quarter-point cut. Bets on the larger cut were 44% a day earlier, compared to 34% a week ago.
When Fed Chair Jerome Powell strongly supported an imminent start to the monetary easing cycle at the annual economic conference in Jackson Hole last month, he indicated that the central bank’s focus was shifting from fighting inflation to preventing deterioration in the jobs market.
“The August payroll report could be a’make or break’ moment,” TD Securities analysts, including head of global strategy Rich Kelly, wrote in a report. “Recent labor data has fanned fears of labor market softening.”
However, TD anticipates that 205,000 new jobs were created in August, resulting in a quarter point cut this month and a rebound in the dollar.
“There is simply a lot of bad news priced into the USD,” which raises the possibility that a series of positive announcements will initiate a significant correction.
After falling to 142.855 overnight for the first time since Aug. 5, the dollar held its ground at 143.25 yen, supported by a decline in U.S. Treasury yields, with the 10-year note yield falling to a one-month low of 3.721%.
The euro remained steady at $1.1112, just below its one-week high of $1.11195 on Thursday.
At $1.31755, sterling was little changed, remaining close to the overnight high of $1.31855—the highest level since August 30.
The risk-averse Australian dollar lost a little ground to $0.6739.
Bitcoin, the leading cryptocurrency, attempted to rebound this week from a nearly one-month low of $55,575.78 by rising 0.2 percent to $56,167.
