Investing.com – The U.S. dollar edged lower in holiday-hit trading on Monday, as traders awaited key labor market data for clues on possible Federal Reserve rate cuts.
At 05:55 ET (09:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 101.577, after previously reaching 101.79, a level we haven’t seen since August 20th.
Activity is muted on Monday as the US is on holiday to celebrate Labor Day.
Dollar focuses on the payroll report
The dollar recovered last week after selling off around 5% since early July, and now attention turns to the US jobs report due late this week.
The US will be crucial after Federal Reserve Chairman Jerome Powell turned the fight against inflation into a willingness to protect against job losses, suggesting the likelihood of a 25 basis point rate cut later this month.
A result in line with forecasts of a 164,000 gain in nonfarm payrolls and a 4.2% increase would likely eliminate the likelihood of a 50 basis point cut entirely, and would provide an exceptionally strong report for necessary for the markets to give up at 25 basis points. .
There are other updates on the health of the labor market ahead of Friday’s report, starting with Wednesday’s report, which also includes data on layoffs. the private sector hiring data will be released on Thursday along with the weekly report.
The euro is rebounding despite weak data and political uncertainty
In Europe, it traded 0.2% higher to 1.1067, strengthening after previously reaching 1.1043, the lowest level since August 19.
remained in contraction territory in August, with the final Eurozone Purchasing Managers’ Index compiled by S&P Global reaching 45.8 in August, well below the 50 mark that separates growth from contraction.
June’s interest rate cuts were aimed at boosting the region’s economy, and they look set to do so again later this month after eurozone inflation fell to 2.2% in August, the lowest in more than three year.
On the political front in Europe, the Alternative for Germany (AfD) became the first far-right party to win a parliamentary election in Germany since World War II, resulting in a result in Thuringia.
The German government’s wavering authority could also complicate European policy, with the bloc’s other major power, France, still struggling to form a government after snap elections in June and July.
rose 0.1% to 1.3138, while demand for sterling was still strong, boosted by expectations that interest rates will remain high for longer than in the United States and the eurozone.
The BoE cut rates by 25 basis points to 5% on August 1 and money markets are pricing in another 40 basis points of rate cuts by the end of the year.
Yen and Yuan Fall After PMI Data
In Asia, yields rose 0.4% to 146.69, with the yen retreating slightly after Japanese factory activity contracted again in August, a private sector survey showed earlier Monday.
The final (PMI) rose to 49.8 in August versus 49.1 in July, and was higher than the 49.5 reported in the flash reading. It remained below the 50.0 threshold that separates growth from contraction for two consecutive months.
traded 0.3% higher at 7.1105, with the yuan retreating after China’s ‘official’ data on Saturday provided the first insight into how the world’s second-largest economy performed in August, with manufacturing activity falling to its lowest point fell in six months and month shrank for the fourth time in a row.
