Dollar Holds Steady Ahead of Jobs Report

The dollar index was little changed at around 101.4 on Thursday after experiencing heightened volatility in the previous session, as investors cautiously awaited the June jobs report for fresh insights into labor market conditions and greater clarity on the Federal Reserve’s policy outlook. Data released on Wednesday showed private-sector hiring in the US slowed more than expected last month. Fed Chair Kevin Warsh also said inflation expectations had eased over the past month, signaling there was no urgency to raise interest rates. However, he reiterated the central bank’s commitment to restoring price stability. Markets continue to price in more than a 60% chance of a Fed rate hike in September. The dollar also remained resilient despite rising oil shipments through the Strait of Hormuz and signs of progress in indirect US-Iran talks, which pushed oil prices lower and eased inflation concerns.

The US dollar index rose to 101.3 on Wednesday, easing from the 15-month high of 101.6 earlier in the session after Fed Chairman Warsh said that inflationary risks are lower. The remark was aligned with a reduction in the ISM Manufacturing prices gauge, aided by the pullback in energy prices, and taming the risk of multiple Fed rate hikes this year Still, a majority of the market continued to expect some level of tightening. Data aggregated by the ADP indicated that the US private sector added nearly 100,000 jobs in June, slightly under market expectations but firmly above the average this year to maintain leeway for the Fed to restrict monetary policy. The dollar was also supported by Warsh's campaign to reduce the central bank's balance sheet, limiting the supply of dollars and playing a part in the unwinding of the dollar debasement trade from earlier in the year. Lastly, bets of ECB hikes eased amid softer inflation in the bloc, while a fiscally-dovish Japan pressured the yen.

The US dollar index rose toward 101.6 on Wednesday, testing its highest in 15 months as the outlook of a hawkish Federal Reserve was combined with weakness in major G10 currencies. A majority of the market continued to expect at least one rate hike by the Fed this year amid evidence of a robust labor market and increasing core inflation. Data aggregated by the ADP indicated that the US private sector added 98,000 jobs in June, slightly under market expectations but firmly above the average this year to maintain leeway for the Fed to restrict monetary policy further. The dollar was also supported by Fed Chair Warsh's campaign to reduce the central bank's balance sheet, limiting the supply of dollars and playing a part in the unwinding of the dollar debasement trade from earlier in the year. Lastly, bets of multiple ECB hikes this year were tempered by soft Eurozone inflation, while a fiscally-dovish Japan pressured the yen.