Dollar Retreats as Rate Hike Bets Ease Amid Strong Jobs Forecast

The US Dollar retreated on Friday as easing bets of a rate hike from the Federal Reserve became more pronounced. The USD Index had lost over 0.5% on Thursday due to cautious comments from Fed Governor Christopher Waller, who hinted at keeping rates steady if August inflation shows continued progress but would consider a hike if the data come in hot.

The probability of a 25 basis points rate hike at the next meeting declined to 50% from about 63% earlier in the week, according to the CME FedWatch Tool. This shift in expectations weighed on the US Dollar, which had been under pressure throughout the week.

Nonfarm Payrolls are expected to rise by 56K in August, following a surprise 23K decline in July. The Unemployment Rate is seen holding steady at 4.1% in this period. Despite the strong jobs forecast, market participants do not expect a robust US jobs report to tip the balance towards a September rate hike from the Fed.