By Konstantinos Chrysikos, Head of Customer Relationship Management, Kudotrade
The US dollar remained relatively stable for a second day after it tumbled on Friday following a weaker-than-expected labour market report and lower revisions. Traders could remain cautious as they monitor new data releases, including the employment component of the ISM data today and jobless claims later this week, which could affect monetary policy expectations.
Treasury yields rebounded slightly as they stabilized, helping support the dollar. However, both could remain exposed to changing expectations as new data comes out. Markets currently see a 90% probability for an interest rate cut at the September Fed meeting.
Traders could also keep an eye on US President Trump’s next steps regarding the appointment of a new head for the Bureau of Labor Statistics and the replacement of Federal Reserve Governor Adriana Kugler. The latter could affect monetary policy expectations and could contribute to the uncertainty.
In the meantime, yields and the USD could remain under pressure if expectations continue to lean toward more interest rate cuts. In this regard, San Francisco Fed President Mary Daly said on Monday that the case for rate cuts was strengthening, citing softening labour market indicators and the absence of persistent inflationary pressure. With fresh tariffs clouding the growth outlook and questions mounting over the Fed’s future composition, uncertainty could remain high.