The US Dollar Index (DXY), which tracks the greenback against six major currencies, attempted to strengthen during the European session on Tuesday after hitting a fresh six-week low near 97.30 the previous day.

The US labor market has deteriorated following tariffs imposed by President Donald Trump since taking office. The US Nonfarm Payrolls (NFP) report for August showed on Friday that labor demand is slowing further, with companies adding fewer new workers. In August, the US economy added 22,000 new jobs, the worst figure seen since January 2021.

The weakening US labor market has led to a sharp increase in bets in favor of an interest rate cut by the Federal Reserve (Fed) at its policy meeting next week.

According to the CME FedWatch tool, traders see an 11.6% chance that the Fed will cut interest rates by 50 basis points (bps) to 3.75%-4.00%, while the rest expect a standard rate cut of 25 bps.

Analysts at Standard Chartered Bank have also raised their expectations for the Fed's rate cut rate at next week's policy meeting to 50 bps, from the previously projected 25 bps, stating that the labor market has become "weak from solid in less than six weeks."

On Tuesday, investors will be closely watching the revised Nonfarm Payrolls (NFP) benchmark employment data through March 2025. The impact of the revised employment report will be significant on market expectations regarding the Fed's monetary policy outlook.

In 2024, the Fed cut interest rates by 50 bps in September after the revised payrolls report showed that the economy created 818,000 fewer jobs than previously anticipated. (alg)

Source: Fxstreet