The US Dollar Index (DXY), a measure of the value of the US dollar (USD) against a basket of six global currencies, traded negative around 98.70 at the start of Tuesday's Asian trading session. Traders await the release of the US ISM Services Purchasing Managers' Index (PMI) on Tuesday for further impetus.
US Nonfarm Payrolls (NFP) rose by 73,000 in July, compared to a 14,000 increase (revised from 147,000) previously, according to the US Bureau of Labor Statistics (BLS) on Friday. This figure was below the market consensus of 110,000. Meanwhile, the US Unemployment Rate edged up to 4.2% in July from 4.1% in June, in line with expectations. The US ISM Manufacturing PMI was also weaker than projected, falling to 48.0 in July from 49.0 in June.
Fed fund futures traders again increased their bets on an interest rate cut on Friday following dismal US economic data, which put downward pressure on the US dollar. The market now rates a nearly 84% probability that the Fed will cut interest rates by 25 basis points (bps) at its September meeting, due to weaker-than-expected US employment data, according to CME FedWatch, with a nearly 60 bps cut expected in December, implying two 25 bps cuts and a 40% chance of a third cut.
Late Monday, San Francisco Fed President Mary C. Daly said that, given mounting evidence of a weakening US labor market and the lack of persistent rate-driven inflation, the time is near for a rate cut.
Furthermore, resurgent concerns over the Fed's independence contributed to the USD's decline. The Fed on Friday announced the early resignation of Adriana D. Kugler, a member of the Board of Governors, amid ongoing tensions with Fed Chairman Jerome Powell.
Looking ahead, traders will be watching the US ISM Services PMI on Tuesday. The ISM Services PMI is expected to improve to 51.5 in July from 50.8 in the previous reading. If the report shows a better-than-expected reading, this could encourage the US dollar to strengthen against its rivals in the near term. (alg)
Source: FXstreet
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