The dollar index staggered to a new two-month low in Asian hours, taking its decline since Wednesday to more than 1%, following a flurry of weaker U.S. economic readings, most recently a factory slowdown and surprise contraction in construction work.
The big test comes on Friday with monthly payrolls figures, but a jobs market reading later today could also deal the dollar a blow in the form of the JOLTS report – a favourite of former Fed Chair Janet Yellen – which is forecast to show job openings sinking to deeper three-year lows.
Equity markets aren’t sure how to take the news, which on the one hand brings forward potential Federal Reserve rate cuts, but on the other sends a worrying signal about corporate profits.
Not so the bond market, where yields are firmly lower.
From a coin toss a week ago, odds are now 60:40 for a September rate cut, according to the CME Group’s FedWatch Tool.
The next Fed meeting runs from Tuesday to Wednesday of next week, and while it might not bring a policy change, updated economic and rates projections will give fresh fodder for punters.
