[1/2]Euro and US dollar banknotes are shown in this illustration taken on March 10, 2023. REUTERS/Dado Ruvik/Illustration Obtain licensing rights
NEW YORK (Reuters) – The dollar fell to a two-week low against the euro and a basket of currencies on Wednesday after data showed that U.S. private payrolls rose less-than-expected in August, adding to expectations that the Federal Reserve will continue operating. . Stop raising interest rates.
Soft data this week raised bets that the US central bank has ended its tightening cycle. It follows a brief increase in expectations for a November rate hike following the relatively hawkish comments made by Federal Reserve Chairman Jerome Powell on Friday.
This Friday’s August jobs report will be watched closely for further confirmation that labor market malaise is easing with interest rates remaining relatively high.
“The dollar is falling on the belief that the Fed has done enough,” said Adam Patton, senior currency analyst at ForexLive in Toronto. “I think the non-farm payrolls report will be the last ‘grab for the fork’ moment if it is weak.”
Friday’s jobs data is expected to show that employers added 170,000 jobs in August, according to the median estimate of economists polled by Reuters. (USNFAR=ECI)
ADP’s National Employment Report released on Wednesday showed that private sector payrolls rose by 177,000 jobs last month. Economists polled by Reuters had expected private sector employment to increase by 195,000.
The dollar also fell on Tuesday after data showed that employment opportunities in the United States fell to the lowest level in nearly two-and-a-half years in July as the labor market gradually slowed.
Markets now see a 91% chance of the Fed leaving interest rates unchanged next month, CME FedWatch tool showed, and a 43% chance of a rate hike in November.
The dollar index fell 0.54% to 102.97. It fell from 104.44 last Friday, the highest level since June 1.
The US currency fell 0.09 percent to 145.735 Japanese yen, retreating from the highest level in ten months of 147.375 yen recorded on Tuesday, which reduced the possibility of Japanese authorities intervention to support the troubled currency.
The euro rose 0.54 percent to $1.0938. It rose from $1.07655 on Friday, the lowest since June 13.
The single currency was supported by higher-than-expected inflation in Germany, one day before the release of expected consumer price data in the eurozone.
The likelihood that the European Central Bank will raise interest rates in September may depend on Thursday’s figures.
Financial markets have raised their bets on a September rate hike by the European Central Bank, with a 60% chance of a 25bp move.
“A September hike at this point could be a coin toss, but more importantly we feel hawks will see this as a last chance to raise rates one last time,” said Benjamin Schroeder, chief interest rate strategist at ING. .
Meanwhile, Australian inflation slowed to a 17-month low in July, strengthening the case for the RBA to keep interest rates steady at next week’s policy meeting.
The Australian dollar was last up 0.54% at $0.6514, after earlier falling as low as $0.64495 in the wake of the data.
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Currency bid prices at 10:15 am (1415 GMT)
Reporting by Karen Brittle. Additional reporting by Joyce Alves in London. Editing by Mark Heinrich
Our standards: Thomson Reuters Principles of Trust.
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