The US dollar is gaining ground after robust payrolls data pushed market expectations for a September Federal Reserve rate hike back toward 60 percent, according to BNY strategist Geoff Yu. With the Fed now entering its pre-meeting blackout period where officials cannot publicly comment on policy, upcoming inflation data will be critical in determining whether traders continue repricing hawkish bets into the decision. The stronger-than-expected jobs numbers have revived concerns that the Fed may need to extend its tightening cycle, reversing recent dovish sentiment that had weighed on the greenback. Traders and brokers should monitor CPI and PPI releases closely as these will be the primary market movers in the absence of Fed commentary. The blackout means no official guidance will clarify the central bank’s stance, leaving markets vulnerable to data-driven volatility. Currency pairs involving USD are likely to see heightened sensitivity to any inflation surprises in coming sessions.
FXnCO Insight
Position sizing should account for elevated USD volatility as inflation prints become the sole driver of September rate hike probabilities during the Fed blackout window.
Source: FXStreet