By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
The US dollar could remain under pressure on Tuesday, and traded near seven-week lows as concerns over labor market weakness reinforced expectations of more aggressive Federal Reserve easing. Traders could remain cautious ahead of inflation data and payroll revisions, with estimates pointing to a downward adjustment of up to 800,000 jobs for the April 2024-March 2025 period. Such revisions would strengthen the narrative of a cooling labor market and cement the case for further policy accommodation. Market pricing reflects this view, with almost 90% odds of a 25-basis-point cut at next week’s Fed meeting.
Treasury yields recovered slightly but remained on a downward slope. Investors continue to price in multiple cuts over the coming months, leaving the curve vulnerable to renewed declines if upcoming inflation releases surprise to the downside. Wednesday’s PPI and Thursday’s CPI will be pivotal in shaping near-term sentiment. Softer readings would reinforce expectations of aggressive easing and extend pressure on the dollar and yields, while stronger results could provide temporary relief but are unlikely to shift the broader dovish trajectory.