Dollar Plummets as Investors Await Jobs Data

21 Aug 2024 , 10:15 AM

The dollar fell to its lowest level this year against the euro on Wednesday, as traders braced for potentially critical adjustments to U.S. payrolls data later in the day, ahead of Federal Reserve Chair Jerome Powell’s speech at the end of the week.

The US dollar also fell below the carefully watched 145 yen mark and remained near to the more than one-year low against sterling reached overnight. U.S. bond yields fell to their lowest level in more than a year on August 5, after surprise disappointing monthly job numbers triggered recession fears.

A dismal monthly payrolls report at the start of the month sparked a surge in volatility across asset classes, leaving market players preparing for another potential shock with updated data due later Wednesday.

The August 2 payrolls report prompted traders to price in the possibility of the Fed cutting interest rates by a half percentage point at its mid-September policy meeting, raising the indicated chance to around 71%, according to CME Group’s FedWatch Tool.

However, a string of positive macroeconomic data has shifted the odds, with bets now 72% for a quarter-point decrease and 28% for a larger reduction.

Powell’s keynote talk at the Kansas City Fed’s Jackson Hole economic conference on Friday will be closely watched for signals on the expected size of a rate cut next month, as well as whether borrowing costs would be reduced at subsequent Fed meetings.

The US dollar index, which measures the currency against the euro, sterling, yen, and three other major rivals, fell to a new low since January 2 at 101.34 as of 0026 GMT, after declining 0.5% or more in each of the previous three days.

The euro climbed to $1.1131, its highest level since December 28.

Sterling was trading at $1.3033 after reaching a high of $1.3054 on Tuesday, a level last touched in July of last year.

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