Markets remain cautious on USD strength as softer wage growth and weak jobs data await CPI confirmation before the September FOMC meeting.
The US Dollar shows limited reaction to weaker jobs data as traders await Wednesday’s Consumer Price Index report and another Nonfarm Payrolls release before the Federal Reserve’s September meeting. A 3.2% year-over-year rise in average hourly earnings, down from 3.5%, signals reduced labor-market inflation pressures, aligning with pre-pandemic levels.
Fed rate hike probabilities for September have slipped to 40% from 55%, reflecting uncertainty despite recent hawkish Fed communications. Two CPI reports and another jobs update remain before the next policy decision, keeping markets hesitant to price out further tightening.
FX sentiment may shift early this week following Friday’s negative NFP print, though a sustained Dollar rally likely hinges on Wednesday’s inflation data. A third consecutive weaker-than-expected core CPI could bolster dovish Fed expectations, though immediate market reactions may remain muted.