The US dollar started the week relatively stable and could see a limited performance as traders await key inflation reports, but the currency could remain at risk.
Weaker-than-expected economic data have fueled market bets on policy easing.
Higher jobless claims and a weaker July NFP reinforced expectations for a September rate cut, with more potential cuts expected this year. In this regard, Fed Governor Bowman stated that three cuts are likely appropriate this year, citing a weakening labor market as outweighing inflation risks, aligning with market expectations.
This could pressure both the dollar and yields.
US Treasury yields remained near their recent lows despite a small rebound as monetary policy expectations continue to lean toward a dovish stance.
New data could affect the market’s direction as a softer inflation figure tomorrow could further weigh on yields. However, a rebound in inflation could introduce some uncertainty regarding the Fed’s stance and could support yields.
Looking ahead, all eyes are now on incoming inflation data and the Fed’s tone at Jackson Hole. A softer CPI could raise interest rate cut expectations and deepen the dollar’s weakness, while a surprise to the upside may trigger a short-term rebound.
