Dollar Muted Despite Robust NFP, Oil Prices Rise on Ongoing US-Iran Tensions
The US economy added 162k jobs in August, far exceeding expectations of just 56k, but this strong jobs report did little to boost the dollar. Despite Treasury yields rising, the greenback remains on the back foot after last week's unexpected reversal.
This has left investors focused on upcoming CPI data, which could tip the balance for a potential interest rate hike by the Fed next week. A hot inflation reading would likely sway policymakers in favor of a 25-bps increase, while any moderation in price growth might push bets back to December.
The dollar's weakness has been further exacerbated by yen buying, with the currency hitting a seven-month high against the dollar and breaching the 155 mark for the first time since February. Hawkish commentary from Bank of Japan officials, combined with reasonably solid data out of Japan, have boosted rate hike expectations to 75%.
Oil prices remain elevated on concerns over US-Iran tensions in the Middle East, with both WTI and Brent futures trading at one-and-a-half-month highs. This has raised persistent price pressures from high energy costs.