FUNDAMENTAL OVERVIEW USD: The US dollar weakened across the board on Friday following a softer than expected NFP report , with the headline showing negative payroll growth and average hourly earnings missing forecasts by a notable margin.
The data triggered a dovish repricing in interest rate expectations, with the probability of a September rate hike falling to 38%, compared with 54% before the release
Market pricing has normalised since then, with the probability of a September hike rising back to 48%. The reason for this whipsaw in expectations is that there was a significant loss of government jobs, which made the report look much softer than it actually was. The unemployment rate painted a different picture, falling further to 4.1%.
Overall, the labour market remains on a better trajectory than it has been over the past three years. The next major event will be the US CPI report on Wednesday. The data will be critical for the September FOMC decision and the Jackson Hole Symposium.