Dollar Hangs by Thread Ahead of NFP Data Release
The US dollar is bracing for a potentially volatile ride as the highly anticipated August non-farm payrolls (NFP) data approaches. A strengthening Japanese yen has put downward pressure on the greenback, causing yields on Japanese and US bonds to fall.
Christopher Waller, a Federal Reserve official, has shifted his stance from hawkish to data-dependent, reducing the likelihood of a rate hike in September to 50%. The USD index continues to slide amidst this backdrop.
The trade deficit has widened to its highest level since January 2025, further eroding confidence in the US dollar. Speculators are spooked by rumors of an overnight rate hike of 50bp in September, but a Bloomberg insider suggests the Governing Board will only raise it by 25bp.
Nomura Securities believes that the market has overreacted to expectations of a double rate hike in September and instead predicts a tightening of monetary policy at three consecutive meetings, bringing the key rate to 1.75% by year-end 2026.