US Dollar Price Forecast: DXY Weakens Ahead of NFP; EUR/USD and GBP/USD Recover
The U.S. dollar (DXY) is anticipated to weaken ahead of the nonfarm payrolls (NFP) report, leading to a decline in EUR/USD and GBP/USD. Federal Reserve Governor Christopher Waller suggested that signs of disinflation could justify maintaining monetary policy at the September meeting. The markets currently price a 50% chance of a Fed rate hike, down from 63% the previous day.
In the upcoming August jobs report, economists expect a payroll growth of approximately 56,000, marking a significant improvement from the July figure, which saw a decrease of 23,000. Unemployment is projected to remain steady at 4.1%. The report may also reveal a moderation in wage growth.
Conversely, the euro is expected to appreciate against the U.S. dollar. A Reuters poll of 65 economists indicates a unanimous consensus that the European Central Bank (ECB) will raise the deposit rate by 25 basis points to 2.50% on September 10. While core inflation in the euro zone has dropped to 2.4%, inflation remains a concern at 3.3%.
The Bank of England is more inclined to aggressive rate hikes, with Huw Pill advocating for an even more abrupt increase. However, concerns over the UK government's cash flow, triggered by rising yields on UK government bonds, may impact the government's budget for October.
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