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Softer US labor data extends dollar decline, BNY says

BNY points to a Fed-hike odds shift after nonfarm payrolls missed expectations, with markets now pricing less than a 50% chance of a September increase.

Reported · Written up by our desk · Major Pairs

BNY analysts Geoff Yu and David Tam said weaker US labor data have pushed down real-rate expectations and extended the US dollar's slide, which they view as a more supportive backdrop for risk assets and duration.

They highlighted the upcoming US CPI and PPI releases as key for “Fed pricing,” noting that softer inflation would reinforce current easing expectations, while stronger prints could quickly lift front-end yields.

The view follows last Friday’s US nonfarm payrolls report, which came in at minus 23,000 versus the expected gain of 80,000, along with downward revisions that cooled expectations for a September Fed hike.

BNY said the resulting shift has left markets with less than a 50% chance of a September move, and described the dollar decline as “reopened a window for duration and risk assets.”

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