The US Dollar experienced a rebound after a period of losses, primarily driven by unexpectedly positive US jobs data. This data has led to a recalibration of expectations regarding Federal Reserve rate cuts, with markets now anticipating a later and potentially less aggressive easing cycle.
- The dollar index rebounded to near 97 after three sessions of losses.
- US payrolls rose by 130,000 in January, the biggest gain in more than a year.
- The unemployment rate unexpectedly fell to 4.3%, signalling a stabilizing labour market.
- Markets are now pricing the next Fed rate cut in July instead of June.
- Interest rate swaps indicate about 49 basis points of easing by December, down from 59 basis points previously.
- The Fed kept rates unchanged in January.
- The US Dollar Index (DXY) is trading near 96.60.
- Traders await the delayed US employment report.
The recent employment figures have strengthened the dollar’s position. The revised expectations for Federal Reserve policy suggest that the dollar may maintain its strength, as the reduced likelihood of near-term rate cuts makes it a more attractive investment relative to currencies where easing is anticipated. This could influence trade balances and investment flows, supporting the dollar’s value in the coming months.