FX UPDATE 02/09/2024

?The Dollar dipped on Monday but remained close to a two-week high as investor focus shifts to an important US jobs report at the end of the week. The US payrolls report, due on Friday, will be critical following Federal Reserve Chair Jerome Powell's move from focusing on inflation to preparing to safeguard against job losses.? Analysts believe the job figures will influence the size of the Federal Reserve's anticipated rate cut. Markets have been pricing in a 25-basis point cut for several weeks.

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The Dollar previously strengthened to its highest level since 20th August, supported by an increase in long-term Treasury yields to their highest point since mid-August. This rise followed inflation data suggesting a smaller rate cut and GDP figures indicating that the economy was robust enough to allow the Federal Reserve to adopt a less aggressive approach to easing its policy. Traders are currently assigning a 33% probability to a 50-basis point rate cut by the Federal Reserve this month?while fully anticipating a 25-bais point cut. This is a fall from the previous week, when there was a 36% chance assigned to the larger reduction.

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The Dollar index, measuring the currency against six peers, fell 0.10% to 101.65, after previously reaching 101.79, last seen on 20th August, Reuters reports. Analysts noted that the US public holiday on Monday could lead to a slow start for the Dollar this week. However, the week will pick up pace with a steady stream of macroeconomic data, culminating in the non-farm payrolls report on Friday.

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Elsewhere, the Euro rose to $1.1062?after hitting $1.1043, the lowest since 19th August. Inflation remained persistent, and European Central Bank policymakers offered no hints about further monetary easing beyond the anticipated September rate cut. Market expectations have adjusted, with traders now pricing in 59 basis points of rate cuts by the end of the year, down from 70 basis points in mid-August.

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Furthermore, Sterling was flat at $1.31255 at the time of writing, near Friday’s low of $1.31095, its weakest since 23rd August. Last week, the Pound to Euro exchange rate surged to just above 1.19 but then pulled back, establishing this level as a significant resistance point. With GBP/EUR at 1.19, this corresponds to key support at 0.84 in EUR/GBP, Pound Sterling Live reports. “GBP/EUR is a whisker away from the €1.19 handle – a level it’s only been above for 16 days of the past two years,” said George Vessey, Senior FX Strategist at Convera.

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In India, the Rupee edged down on Monday to 83.8775 to the Dollar, compared to the prior close of 83.8625. Other Asian currencies were down between 0.2% and 0.5%.?

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