Dollar Slips as Markets Await U.S. Jobs Data and Fed Rate Decision
The U.S. dollar edged lower on Monday as traders looked ahead to a busy week of labor market data that could shape expectations for a Federal Reserve rate cut later this month.
Investors continued to digest Friday’s inflation figures, a court ruling declaring most of Donald Trump’s tariffs illegal, and the president’s escalating conflict with the Fed over his attempt to remove Governor Lisa Cook.
In Asian trading, the dollar slipped 0.04% against the yen to 146.98, extending its 2.5% monthly decline versus the Japanese currency. The euro gained 0.25% to $1.1710, while sterling rose 0.14% to $1.3522. U.S. markets were closed for a public holiday.
The highlight for investors will be Friday’s nonfarm payrolls report, preceded by data on job openings and private payrolls. According to Carol Kong, currency strategist at Commonwealth Bank of Australia, weak data could strengthen expectations of a Fed cut:
“Any downside surprises will likely push markets to expect a larger 50bps cut instead of the standard 25bps,” she said.
The CME FedWatch tool shows traders pricing in an 88% chance of a 25-basis-point cut at the Fed’s September 16–17 meeting. Against a basket of major currencies, the Dollar Index fell 0.15% to 97.69, extending a 2.2% monthly drop.
Beyond rate expectations, the dollar has been pressured by concerns over Fed independence. Trump’s unprecedented effort to fire Governor Cook remains tied up in court, with no ruling issued yet.
Uncertainty also surrounds U.S. trade policy. Despite the appeals court ruling against Trump’s tariffs, U.S. Trade Representative Jamieson Greer confirmed that talks with partners continue. Analysts suggest tariffs are unlikely to disappear, as Trump may seek alternative legal avenues to keep them in place.
In other currency moves, the Australian dollar gained 0.11% to $0.6544 after touching a two-week high, while the New Zealand dollar rose 0.13% to $0.5902. The onshore yuan held near a 10-month high at 7.1318 per dollar, supported by strong central bank fixings and a buoyant domestic equity market.
A private survey showed China’s factory activity expanded in August at its fastest pace in five months on stronger new orders, contrasting with official data that signaled a fifth consecutive contraction.
