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The U.S. dollar steadied on Thursday, consolidating in a volatile week as investors weighed softening labor market data and ongoing fragility in global bond markets, reinforcing expectations that the Federal Reserve will cut rates this month.
Labor Market in Focus
- Data on Wednesday showed job openings fell to a 10-month low in July, signaling some cooling in labor demand.
- Layoffs, however, remained relatively low, underscoring resilience in parts of the job market.
- Traders are now awaiting Thursday’s releases of private payrolls and layoff data, followed by Friday’s nonfarm payrolls report, which will be pivotal for shaping Fed policy expectations.
- According to CME FedWatch, investors are pricing in a near-100% chance of a September cut, up from 89% last week, with markets now expecting 139 bps of easing by the end of 2025.
Dollar and Currency Moves
- The dollar index (DXY) edged higher to 98.31, reflecting cautious positioning ahead of Friday’s data.
- The euro slipped 0.14% to $1.1645, while sterling fell 0.1% to $1.344, just above recent four-week lows.
- Against the yen, the dollar strengthened 0.2% to 148.34.
- Commodity-linked currencies were weaker: the Australian dollar fell 0.4% to $0.6518, and the New Zealand dollar dipped 0.3% to $0.5859.
Bond Market Fragility
- Global bond markets remain a source of investor unease.
- U.S. 30-year Treasury yields eased to 4.888%, after briefly touching 5% on Wednesday — the highest in six weeks.
- Japanese bond markets saw a smoother 30-year JGB auction, calming investor nerves.
- Analysts highlight that fiscal concerns across the U.S., U.K., and Japan are keeping long-end yields elevated, adding to volatility in currency markets.
Fed Officials Signal Cuts Ahead
Several Fed officials reiterated that labor market weakness is a key risk, bolstering expectations for imminent rate cuts. The September 16–17 Fed meeting is widely seen as the starting point for policy easing, although the size and pace remain in question.
