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The U.S. dollar hovered near a two-month low against major currencies on August 10 as investors awaited this week’s inflation data for clues on the Federal Reserve’s rate path, Reuters reported from Hong Kong. The euro edged higher to $1.1558 near its strongest level since mid-June while sterling held steady at $1.3490 close to a five-week peak. The dollar index that tracks the currency against six major peers stood little changed at 99.6 near its lowest level since June 2.
The Japanese yen held firm at 157.90 per dollar after relinquishing some intervention-driven gains yet remaining well clear of the roughly 164 multi-decade low reached late last month, Reuters data showed. A disappointing employment report on Friday revealed the U.S. economy unexpectedly shed jobs in July with downward revisions to prior months that cooled expectations for a near-term Federal Reserve rate increase. Treasury yields fell with the benchmark 10-year note last at 4.637 percent as futures markets scaled back the probability of a September move to around 44 percent from 67 percent a week earlier.
Trading Economics figures place the Federal Reserve’s benchmark rate at 3.50 to 3.75 percent after it was held unchanged in July for a fifth consecutive meeting. A BNY assessment found the weaker labor-market signal pulled down real-rate expectations and extended the dollar decline without yet producing a clean easing narrative. “The weaker U.S. labor-market signal has pulled down real-rate expectations, extended the dollar decline… but not yet a clean easing story,” Geoff Yu, senior EMEA market strategist at BNY, wrote in a note, adding that perceptions around U.S. inflation data will likely prove the biggest factor for currencies this week.
Consensus estimates cited by Reuters project core CPI to rise 0.2 percent month-on-month in July, lifting the annual rate to 2.5 percent after it stood at 2.6 percent in June. Overall inflation eased to 3.5 percent in June according to the same data sources while producer price readings due Thursday and retail sales figures on Friday will supply further inflation outlook information. “Although there’s a lot of inflation dynamics, the Fed will for now stay on the sidelines and wait to see how things play out,” Rodrigo Catril, senior FX strategist at NAB, said in a podcast.
Oil prices rose with Brent futures last up 1.4 percent at roughly $85 per barrel amid uncertainty over the Strait of Hormuz reopening, Reuters reported. Iran indicated a shipping lanes deal with Oman had reached final stages but noted the United States must still meet additional conditions for progress. The New Zealand dollar and Australian dollar each slipped 0.1 percent to $0.7062 and $0.5889 respectively in Asian trade as participants awaited the Reserve Bank of Australia’s expected decision to maintain its key rate at 4.35 percent.
