Dollar Whipsaws After Soft NFP Report as Market Awaits US CPI

The US dollar weakened across the board after a softer-than-expected nonfarm payrolls report. The headline number showed negative payroll growth, and average hourly earnings missed forecasts by a notable margin.

This dovish repricing in interest rate expectations saw the probability of a September rate hike fall to 38%, from 54% before the release. However, market pricing has since normalized, with the probability rising back to 48%.

The unemployment rate painted a different picture, falling further to 4.1%. The labour market remains on a better trajectory than it has been over the past three years.

With the US CPI report due on Wednesday, a hot report will likely trigger a rally in the US dollar and increase rate hike bets. A soft report, on the other hand, should reduce further the risk of Fed tightening and put more pressure on the greenback.