The dollar started Monday on a steady footing as investors assessed U.S. jobs data that showed some signs of cooling and bolstered expectations that the Federal Reserve was likely at the end of its monetary tightening cycle.
Data on Friday showed U.S. job growth picked up in August, but the unemployment rate jumped to 3.8 percent, while wage gains moderated. The economy created 110,000 fewer jobs than previously reported in June and July.
“The Goldilocks metaphor is much used and abused in economic and financial circles, but in relation to the various ‘soft landing’ signals emanating from the report, on this occasion, it does seem entirely appropriate,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.
Markets are pricing in a 93 percent chance of the Fed holding steady on rates this month and over 60 percent probability of no more hikes this year, CME FedWatch tool showed.
Against a basket of currencies, the dollar was little changed at 104.20 but remained close to the two-month peak of 104.44 it touched on Aug. 25. The index rose 1.7 percent in August, snapping its two-month losing streak. U.S. markets are closed on Monday.
A string of economic data highlighting moderating inflation as well as an easing labour market has added to the impression the U.S. economy is cooling without slowing sharply, reinforcing hopes that the economy is set for a soft landing.
However, Citi strategists are warning of a harder landing, saying in a note that “sticky wage and price inflation will lead to higher-for-longer policy rates and an eventual more substantial slowing of economic activity.”
