Dollar Rises as Hawkish Repricing Tests Sustainability
Recent US inflation data left the macro narrative intact, but Federal Reserve Chair Kevin Warsh's speech at Jackson Hole changed market expectations. Markets repriced the probability of a September hike from one-in-three to over 50%, with nearly one and a half cumulative hikes by year-end expected.
The dollar rose as a result, but this week's data will test whether the hawkish repricing can be sustained. On Tuesday, the US Department of Labor releases its Job Openings and Labor Turnover Survey (JOLTS), followed by the Institute for Supply Management's (ISM) Manufacturing and Services surveys on Tuesday and Thursday.
However, the main event is Friday's nonfarm payrolls (NFP) report, where consensus forecasts a rebound to 58,000 after last month's surprisingly weak -23,000 print. A firmer print would validate Warsh's message that the Fed should focus on inflation, while another weak number could temper the hawkish repricing.