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Dollar Dips as Payrolls Data Looms
4 Sep
Summary
- US payrolls expected to grow, impacting Fed policy.
- ECB set for a 25 basis point rate hike.
- Sterling gains on aggressive Bank of England hike expectations.
The dollar is positioned to end the week lower as market participants await the August US payrolls report. Recent remarks from a Federal Reserve Governor indicated that signs of disinflation could support holding monetary policy steady in September, causing a shift in rate hike expectations. The upcoming jobs data is projected to show a significant increase in payrolls, a notable improvement from July's figures, with expectations also pointing to moderated wage growth.
In contrast, the Eurozone's monetary policy trajectory suggests a rate hike is imminent, with economists anticipating a 25 basis point increase to the deposit rate by the European Central Bank. Despite persistent inflation driven by energy costs, core inflation has shown signs of easing. The ECB faces the challenge of carefully managing policy to avoid economic downturn.
Sterling is experiencing gains driven by more aggressive rate hike expectations from the Bank of England. Concerns linger regarding the UK government's fiscal position, influenced by rising bond yields, which will likely shape the upcoming budget. The market is closely watching these developments for their impact on future interest rate decisions.
