Dollar Slips Ahead of Key U.S. Jobs Data; Fed Independence Concerns Linger

The U.S. dollar weakened on Monday as investors turned their attention to a busy week of labor market data that could determine the size of an anticipated Federal Reserve rate cut later this month.

Dollar Under Pressure

• The dollar eased 0.04% against the yen to 146.98, extending a 2.5% monthly decline versus the Japanese currency in August.
• The euro rose 0.25% to $1.1710, while sterling gained 0.14% to $1.3522.
• Against a basket of currencies, the dollar index slipped 0.15% to 97.69, after logging a 2.2% decline in August.

Trading was thin with U.S. markets closed for a public holiday.

Labor Market Data in Focus

This week’s spotlight is on the U.S. nonfarm payrolls report due Friday, preceded by job openings and private payrolls data.

• Analysts said weaker data could strengthen bets for a larger, 50bps Fed cut, while stronger figures would keep markets positioned for a more cautious 25bps move.
• CME FedWatch tool shows markets pricing in an 88% chance of a 25bps cut at the September 16–17 meeting.

“Markets will pay close attention to these releases to gauge the state of the labor market. Any downward surprises will increase market expectations of a rate cut,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

Fed Independence Concerns

Beyond economic data, worries over the Fed’s independence continue to weigh on sentiment.

• President Donald Trump’s attempt to fire Governor Lisa Cook is tied up in a legal battle, with Cook challenging the dismissal in court.
• Analysts warn that political interference could undermine U.S. credibility and drive investors into alternative assets.

Tariffs Uncertainty Adds to Pressure

Markets are also digesting a U.S. appeals court ruling that deemed most Trump-era tariffs illegal, though they remain in place until October 14 pending an appeal.

• U.S. Trade Representative Jamieson Greer said talks with partners continue, signaling Trump may seek new legal avenues to impose tariffs regardless of the ruling.

Other Currencies

• The Australian dollar rose 0.11% to $0.6544, hitting a two-week high.
• The New Zealand dollar gained 0.13% to $0.5902.
• The onshore yuan steadied at 7.1318 per dollar, near a 10-month high, supported by firm central bank fixings and a buoyant domestic stock market.
• Chinese data painted a mixed picture: the private Caixin PMI showed factory activity expanding at the fastest pace in five months, contrasting with the official PMI, which contracted for a fifth straight month.