Dollar May Stabilize Despite Elevated Rate Hike Pricing

The US Dollar has been softer against some currencies, particularly the Japanese Yen and Swiss Franc. Brent Oil prices are nearing $100. Elias Haddad from Brown Brothers Harriman expects the Dollar to stabilize in the near term, except against the Japanese Yen. The recent ADP August private payrolls data showed a disappointing labor market, with only 38k new jobs added in August, compared to a consensus of 47k.

The Federal Reserve's Beige Book reported solid economic activity and stable labor markets, but mixed inflation outlook. The August Services ISM is also expected to indicate resilient demand and sticky inflation pressures.

Haddad believes that despite the elevated Fed rate hike pricing into the September FOMC decision, the central bank will ultimately hold rates and lead to a dovish repricing against the USD. Wage growth remains consistent with the 2% inflation target, and Fed policy is already somewhat restrictive.