US Dollar Index (DXY) dives below 98.00 with US employment on the spotlight

• The Dollar pares previous gains on Friday with all eyes on the key Nonfarm Payrolls release.
• ADP Employment and Jobless Claims figures seen on Thursday have heightened hopes of Fed easing.
• Futures markets are pricing in a 99.4% chance of a quarter-point Fed rate cut in September.

The US Dollar is losing ground against its main peers on Friday, with the market anticipating a soft US Nonfarm Payrolls Report, due later today, to confirm market expectations that the Federal Reserve will finally cut interest rates in September.

The US Dollar Index, which measures the value of the USD against a basket of currencies, was rejected at 98.45 on Thursday and dropped 0.35% so far today, returning to levels right below the 98.00 mark at the time of writing.

Fed easing bets surged after US ADP and Jobless Claims releases

US ADP Employment and weekly Jobless data released on Thursday underscored the softening momentum of the labour market and strengthened the case for an interest rate cut after the next FOMC meeting, due on September 16 and 17.

Those hopes received further endorsement from comments of Fed officials Williams and Goolsbee, who warned about the downside risks for the labour market and showed openness to ease monetary policy in an attempt to support economic growth.

The market is now practically fully pricing a 25 bps rate cut in two weeks, but remains wary of holding large USD Shorts ahead of the NFP release. The market consensus points to a 75K increase in private payrolls in August, a similar reading to July's 73K reading, which triggered a sharp USD sell-off last month.