Dollar Pause: US Labor Data Shifts Market Dynamics
Market dynamics have shifted significantly since the latest softness in US labor data, according to strategists at BNY. They note that the weaker US labor-market signal has pulled down real-rate expectations, extended the Dollar decline, and reopened a window for duration and risk assets.
The recent weak US nonfarm payrolls report, at -23k vs. the expected 80k, and accompanying downward revisions have meaningfully cooled expectations for a Fed hike in September, leaving the market with a less than 50% chance of a hike.
President Donald Trump stated over the weekend that they are 'semi-negotiating' with Tehran, while adding that they will wait for the economic pressure on Iran to mount. However, Tehran said they are not engaging in negotiations with the US and submitted a list of demands for reopening the Strait of Hormuz.
The RBA is widely expected to keep the policy rate at 4.35% for a second straight meeting at its upcoming decision, while maintaining a clear tightening bias. The central bank is poised to reiterate that it stands ready to increase the cash rate further if needed as inflation 'continues to exceed 3.0%.'