Stable Fed rate expectations and caution before tomorrow’s jobs report limit USD moves despite improved risk sentiment.
The US Dollar remains range-bound as markets adopt a wait-and-see approach before tomorrow’s nonfarm payrolls report. Improved risk sentiment, driven by a deal to secure shipping routes in the Strait of Hormuz, has slightly weighed on the greenback, but Fed rate expectations remain supportive.
Expectations for Fed meetings have shown little change since July, with 14-17 basis points priced for September and 30-35 basis points for December. This stability persists despite a $15 per barrel drop in Brent crude, underscoring that US rate expectations are driven more by economic data and Fed communication than energy prices.
Yesterday’s ADP payrolls came in softer at 44k, while the ISM services employment subindex fell to 47.5, signaling potential downside risks for tomorrow’s payrolls. Markets are also monitoring US-Iran negotiations, though geopolitical headlines have had limited impact on the Dollar’s range.