By Saqib Iqbal Ahmed and Amanda Cooper
NEW YORK (Reuters) – The dollar hovered around a two-week high against the euro on Tuesday as traders braced for a week of data, including Friday’s U.S. payrolls report that shows the path of the Federal Reserve’s rate cut could determine.
Investor attention will be focused on US payroll data this week after Fed Chairman Jerome Powell last month approved an imminent start of interest rate cuts in a nod to concerns about a weakening labor market.
Economists polled by Reuters expect a rise of 165,000 U.S. jobs in August, up from an increase of 114,000 in July.
In addition, Wednesday’s job vacancies data and Thursday’s unemployment claims report will be in the spotlight.
A gauge of the U.S. manufacturing sector rose last month from an eight-month low in July, amid an improvement in employment, but the overall trend continued to point to subdued factory activity, data showed on Tuesday.
The euro was 0.3% lower against the dollar at $1.1043 on Tuesday, after falling to a two-week low of $1.103375 earlier in the session.
“We could see some intraday volatility before the tracks go to print, similar to what we’re seeing today as US competitors return from Labor Day, although I think most competitors will be trying to keep their powder dry ahead of the main event at the end. of the week,” said Michael Brown, senior research strategist at Pepperstone.
Markets are pricing in a 69% chance of a 25 basis point (bps) cut when the Fed meets on September 17-18, with a 31% chance of a 50 basis point cut, CME’s FedWatch tool showed . In total, around 100 basis points of cuts have been priced in for the entire year.
AUGUST SLIDE
Incoming data will also provide clues as to whether the dollar’s decline in August was exaggerated or whether more losses lie ahead for the dollar.
“A weaker jobs report would likely push the dollar lower,” Fawad Razaqzada, market analyst at StoneX, said in a note.
The Dollar Index, which measures the strength of the US currency against six major peers, fell 2.2% in August, the worst monthly reading since November. On Tuesday the index rose by 0.14% to 101.80.
The dollar fell 1% against the yen to 145.51 yen on Tuesday after media reports quoted the governor of the Bank of Japan as reiterating that the central bank would keep interest rates unchanged in a document presented to a government panel on Tuesday increase if the economy and inflation were to act as policymakers. currently expecting.
The Japanese yen has rallied 10% in the past two months, partly thanks to official interventions.
“The Governor of the Bank of Japan wrote a letter to the Japanese government explaining the decision to raise interest rates in July. He also said the BOJ will continue to raise rates ‘if the economy and prices perform as expected,’” XTB said research director Kathleen Brooks.
“The yen has moved higher on these comments,” she said.
The pound fell against the dollar on Tuesday as investors booked some gains on sterling’s August rally, its biggest monthly gain in 10 months. The British currency last fell 0.4% to $1.30965.
The firmer U.S. dollar weighed on the Australian and New Zealand dollars, which fell on Tuesday after ending August with big gains.
The price fell by 1.1% and was 0.82% lower.
