Created
: 2025.08.04
2025.08.04 20:10
Friday's soft jobs report knocked the stuffing out of the dollar's rally. Investors now attach an 80% probability to a 25bp rate cut from the Federal Reserve in September, ING's FX analyst Chris Turner notes.
"On the subject of the Fed, this weekend saw Governor Adriana Kugler resign, effective 8 August; her term was due to end next January. Her resignation brings forward the opportunity for President Donald Trump to nominate a (likely dovish) replacement for her - a position that could ultimately be used to replace Chair Jerome Powell when his term ends next May. An earlier replacement for Kugler would likely add another dissenter to the Fed's current stance of unchanged rates and turn up the internal pressure on Powell. Here, it will be interesting to hear what other Fed members made of the jobs report. This Wednesday and Thursday, we hear from FOMC voters, Susan Collins, Lisa Cook and Alberto Musalem."
"In addition to the above bearish factors for the dollar, we have also had the news that the President has fired the head of the Bureau of Labor Statistics (BLS) for 'manipulating data for political purposes'. Uncertainty about the quality of US data is not a good look for US asset markets and could add some more risk premium both into the dollar and Treasuries. For Treasuries, this week sees $125bn in auctions of three, ten and thirty-year Treasury notes. Let's see how those auctions go. Regarding the two developments this weekend, Trump has said he'll announce replacements for both positions this week."
"In terms of US data, this week is much lighter. The highlight might be the ISM services data released on Tuesday. That is expected to nudge higher, though there will be much scrutiny both of the prices paid component and the employment figures. The issue of sticky inflation holding the Fed back from a September rate cut is still a live one - and that's why listening to what Fed speakers have to say and the Jackson Hole Fed symposium on 21-23 August will be so important. We think the dollar posted an important corrective high last week and that any bounce in the DXY will stall in the 99.20/50 area before it turns lower to 97.00 again."
Created
: 2025.08.04
Last updated
: 2025.08.04
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