This week, the Dollar Index had been showing a downward trend following a series of weak US economic indicators. However, yesterday saw a rebound in the Dollar, primarily driven by a drop in the Euro-Dollar pair. Market sentiment suggests a cautious approach as investors await the results of tonight’s US employment data.
The August US employment report, to be released this time, is anticipated to show a growth of around 170,000 non-farm payroll jobs. This is a decrease from July’s 187,000, indicating a likely moderation in the job growth rate. However, considering the divergence between previous expectations and actual outcomes, this level of decline might fall within the margin of error. The significant drop in JOLTS Job Openings data recently gave the impression that the US labor market was cooling off slightly, but the upcoming results will reveal the actual impact.
The unemployment rate is expected to remain at 3.5%, matching the previous level. The labor force participation rate is also expected to remain unchanged at 62.6%. As for inflationary pressure, the average hourly earnings will be closely watched. Market estimates anticipate a month-on-month increase of 0.3% and a year-on-year increase of 4.3%, both indicating a slowdown of 0.1 percentage points from the previous figures.
Overall, the effects of the Federal Reserve’s rate hikes are gradually making their presence felt in the labor market, supporting the perspective of a soft landing for the economy.
Other economic indicators to be released include Manufacturing PMI final readings for France, Germany, the Eurozone, the UK, and the US (August), Real GDP for Canada and Brazil (Q2), US Construction Spending (July), and ISM Manufacturing PMI (August). The Euro-Dollar pair is likely to be influenced by comparisons between Eurozone and US economic trends this week, with a focus on differences in PMI readings.
Regarding speeches and events, Cleveland Fed President Mester is expected to discuss inflation. Her remarks are particularly notable given her reputation as a hawk, and the market will closely monitor her comments.
Today, the outcome of US employment data and unemployment rate will be pivotal. Given the potential for significant USD movement based on these results, it’s essential to follow the subsequent market developments.
