Dollar Retreats as Fed Hike Bets Ease Ahead of Key Jobs Report

The US Dollar retreated on Friday after easing Federal Reserve rate hike bets. The USD Index lost more than 0.5% on Thursday due to cautious comments from Federal Reserve Governor Christopher Waller on a potential tightening step at the next meeting.

Later in the American session, market participants will closely watch the August employment report from the US, which features Nonfarm Payrolls, Unemployment Rate, and wage inflation figures.

According to TD Securities, a robust US jobs report is unlikely to tip the balance toward a September move from the Fed. The bank argues that 'a strong payrolls report is a necessary but not a sufficient condition for the Fed to hike in September,' noting that 'the more important piece of the puzzle is inflation as part of the strength in the NFP can be considered to be a reversal of the July weakness.' In terms of market impact, TD expects only a modest currency response.