The US dollar weakened against most major currencies except the yen this week as traders scaled back expectations for two Federal Reserve rate hikes before year-end. Market focus now shifts to the non-farm payrolls report due 7 August. Approximately 45 percent of traders anticipate just one rate hike through the end of 2026, according to CME FedWatch, with probability of a September move dropping to around 55 percent in recent days.
June’s NFP at 57,000 came in roughly half the consensus forecast, pressuring the dollar temporarily, though such effects typically fade within days. The figure still exceeded the twelve-month average. Meanwhile, unemployment unexpectedly declined, though this likely does not signal a sustained trend given current economic conditions. US inflation has risen less than feared earlier this year, reducing immediate pressure on the Fed to act aggressively. Geopolitical developments including an Iran-Oman shipping corridor agreement boosted risk appetite and weighed on oil prices.
FXnCO Insight
Friday’s NFP print could trigger sharp dollar volatility, particularly in EUR/USD and USD/JPY pairs, with traders positioned for softer labour data supporting the dovish Fed repricing.
Source: Finance Magnates