US Dollar: Volatility risks around Fed decision – Commerzbank
Commerzbank’s Thu Lan Nguyen notes that the latest US labour market report does not materially alter expectations for a September Fed rate move, leaving August US inflation as the key driver.
Commerzbank’s Thu Lan Nguyen highlights that the recent US labor market data does not impact expectations for a September Federal Reserve rate increase, with August's inflation data being the primary factor. Market expectations of a 60% chance of a rate hike point to a divided stance, which could lead to significant USD volatility around the Fed meeting, depending on how inflation compares to forecasts.
The report reveals a strong employment increase, indicating that it neither hinders nor boosts a Fed rate hike this month. The US inflation data for August is expected to be the key driver for the Fed's decision, and if the figures match analysts' expectations, markets will likely maintain their current assessment until the meeting.
An upside inflation surprise could further increase rate hike expectations and support the US dollar, while weaker-than-expected inflation would have the opposite effect.
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