Traders trim Fed rate hike bets after softer-than-expected payrolls, with Wednesday’s CPI report set to drive USD moves.
The USD fell broadly Friday after US nonfarm payrolls contracted and wage growth missed forecasts, pushing September rate hike odds to 38%. Markets later pared losses, lifting hike probabilities to 48% as government job losses skewed the report. Unemployment dropped to 4.1%, signaling underlying labor strength.
Prior to the NFP release, Fed rate hike expectations stood at 54% for September. The mixed data left traders focused on Wednesday’s CPI print, which will shape the Fed’s September decision and Jackson Hole messaging. A strong CPI could revive USD bulls, while a weak reading may extend the currency’s pullback.
The AUD remains under pressure ahead of Tuesday’s RBA meeting, where policymakers are expected to hold rates at 4.35%. Soft Q2 CPI and a cooling labor market have reduced tightening risks, leaving the currency vulnerable to USD moves.