The US Dollar Index experienced volatility but found support around 97 after positive US labor market data tempered expectations for near-term Federal Reserve rate cuts. Treasury yields rose in response, and markets adjusted their rate cut expectations, pushing the anticipated first cut to July. The dollar also benefited from a weakening yen. Traders are now focused on the upcoming January CPI report.
- The dollar index steadied above 97.
- Stronger-than-expected US labor market data reduced the likelihood of near-term Federal Reserve rate cuts.
- Nonfarm payrolls increased by 130,000 in January.
- The unemployment rate unexpectedly declined to 4.3%.
- Markets are now pricing the next rate cut in July.
- Traders still expect roughly 50 bps of total easing by year-end.
- Attention now shifts to Friday’s January CPI report.
- The dollar found additional support from a pullback in the yen.
- The US Dollar Index (DXY) holds losses and is trading near 96.60.
- Traders await the delayed US employment report.
The dollar is showing resilience amid fluctuating market conditions. Recent economic data suggests underlying strength in the US economy, specifically within the labor market. This development has led to a recalibration of expectations regarding monetary policy easing by the Federal Reserve. Furthermore, external factors, such as movements in other currencies, have contributed to the dollar’s current position. Future data releases will provide further insights into the direction of the dollar.