Dollar Rebounds as Oil Prices Rise, Labor Market Data Fuels Dovish Sentiment

The US Dollar (USD) is experiencing a recovery on Tuesday, supported by rising oil prices and prolonged fears of energy supply disruption. This has kept global inflation expectations anchored.

According to strategists at ING, the latest US labor market data for July revealed 'clearly dovish and dollar-negative' signals. The data showed a reduction in the overall labor force and a downward revision in labor additions figures from previous months. James Knightley noted that 'the -20k payroll print was not the only concern,' with 'more than 100k of downward revisions' leaving 'average payroll growth at just 20k over the past three months, with health and social care still doing most of the heavy lifting.'

ING argues that this data reinforces their conviction that the Federal Reserve (Fed) is done hiking interest rates. They point out that despite Friday's repricing, 11 basis points are still priced in for September, 28 basis points for December, and 40 basis points for April.