US Dollar: Labour data and hawkish risks in focus – Deutsche Bank

Deutsche Bank analysts highlight the US macroeconomic environment, where the Federal Reserve maintained interest rates but three dissenting officials suggested a rate hike, maintaining inflation concerns. They anticipate two additional 25 basis point hikes this year and closely monitor forthcoming labor and economic data. The focus is on futures pricing for further Fed moves and a steeper Treasury curve, indicating ongoing policy-driven Dollar dynamics.

The upcoming week will be dominated by US labor market data, including the JOLTS report tomorrow, ADP employment survey on Wednesday, and the July employment report on Friday. Attention will also be on whether the data validate the view that the US labor market remains robust. Economists expect Friday's July payrolls report to show employment growth of +65k, slightly higher than June's +57k, while private payrolls are projected to increase by +65k, building on previous growth of +49k.

The unemployment rate is forecast to stay at 4.2%, though there is a risk of rounding up to 4.3% if labor force participation rebounds after a sharp decline. Average hourly earnings are expected to rise by +0.3% month-over-month, unchanged from June, while average hours worked are forecast to remain steady at 34.3 hours. If these figures materialize, the economists' payroll proxy for nominal income growth would remain unchanged at 4.4% year-over-year.

Before Friday's report, several labor market indicators will influence expectations. The JOLTS report (tomorrow) and ADP employment survey (Wednesday) will be closely watched, with economists anticipating ADP employment growth of +60k after +98k previously. Activity indicators will also play a significant role. The ISM manufacturing index (today) is expected to rise to 54.1 from 53.3, while the ISM services index (Wednesday) is forecast at 54.3, barely changing from June's 54.0.

Productivity data (Thursday) will offer additional insight into underlying economic momentum, with forecasts of Q2 nonfarm productivity growth of +3.0% and unit labor costs increasing by +0.5%.