Dollar Strengthens on Geopolitical Risks and Labor Market Speculation

The US dollar has strengthened against major global currencies, benefiting from heightened geopolitical risks and speculation ahead of key labor market data. The employment report is expected to show a rise of 80K jobs with an unchanged unemployment rate of 4.2%, but the Federal Reserve's priority on fighting inflation means that these figures are unlikely to impact the prospects of a September rate hike.

The Iran-Oman deal has raised doubts about its effectiveness, bolstering the greenback. Brent crude oil prices have risen above $80 per barrel as investors question the agreement's durability and fear a shift from de-escalation to escalation in the conflict, driving up oil prices and Treasury yields.

USDJPY has recovered half of the losses incurred due to coordinated currency intervention, with speculators being aided by the interest rate spread between the Federal Reserve and Bank of Japan. However, the US dollar's approach towards the ¥160 mark increases the risk of further yen sell-offs if the Bank of Japan does not take decisive action.