Currencies

Weakness in the dollar comes just days before an address by Fed Chair Jerome Powell at the Jackson Hole Symposium on Friday, where he is expected to offer more cues on a rate cut.

The U.S. dollar fell Monday ahead of the release of minutes from the Federal Reserve’s July policy meeting and Chair Jerome Powell’s upcoming speech at Jackson Hole later this week. 

“The data has prompted investors to shift towards pricing a 25bp Federal Reserve rate cut on 18 September. However, there will be a myriad of data inputs into the Fed equation and the events calendar picks up next week,” said analysts at ING, in a note.

The dollar hovered near a one-week low on Wednesday as traders bet U.S. consumer price data later in the day will keep the Federal Reserve on course to cut rates next month, while sterling eased after softer-than-expected inflation numbers.

“Will July PPI data (Tuesday) and CPI data (Wednesday) continue to provide confidence to the Fed that inflation is under control and allow the easing cycle to start in September? Most think the answer to that question is yes,” said analysts at ING, in a note. 

“The abnormally large reaction to jobless claims figures yesterday was a testament to markets’ extremely elevated sensitivity to all sorts of indications on the US macro outlook right now,” said analysts at ING, in a now.

Initial jobless claims fell to a seasonally adjusted 233,000 for the week ended Aug. 3, the Labor Department said Thursday, suggesting fears that the labor market is unravelling were overblown.

The dollar has been hit hard of late by fears of a U.S. recession after a batch of weak readings on the labor market, which ramped up bets that the Federal Reserve will have to cut rates more than initially expected.

The Japanese yen surged to seven-month highs against the dollar on Monday as traders aggressively unwound carry trades after a slew of economic data last week raised the prospect of a U.S. economic downturn and bigger rate cuts from the Federal Reserve.

The U.S. dollar fell in early European trade Friday after weak data fuelled fears of a sharp slowdown in the world’s largest economy, potentially prompting the Federal Reserve to aggressively loosen monetary policy.