Key facts
- The U.S. dollar index traded near a two-month low ahead of key inflation data.
- Weaker-than-expected U.S. jobs data has lowered the probability of a September Federal Reserve rate hike.
- U.S. Treasury yields fell in response to the jobs report.
- Economists forecast U.S. July CPI to rise 3.4% year-on-year, with core CPI at 2.5%.
- The yen experienced its largest daily drop against the dollar in nearly five months.
The U.S. dollar traded near a two-month low against major currencies as investors awaited key inflation data for insights into the Federal Reserve's monetary policy path. Recent U.S. jobs data, which showed an unexpected decline in employment in July and downward revisions for prior months, has cooled expectations for a Federal Reserve rate hike in September. The futures market now prices in a 44% chance of a hike, down from 67% a week ago. U.S. Treasury yields fell in response, with the benchmark 10-year note yield last at 4.637%.
Economists polled by Reuters expect the July consumer price index to rise 3.4% year on year, with core CPI, which excludes volatile food and energy prices, forecast to increase 2.5% annually. Producer price data and retail sales figures will further inform the inflation outlook.
The euro edged higher to $1.1558, while sterling held steady near a five-week peak at $1.3490. The yen remained firm at 157.90 per dollar. In Asia, the New Zealand dollar and Australian dollar slipped 0.1%.
The Reserve Bank of Australia is expected to leave rates unchanged on Tuesday, while Norges Bank is similarly expected to keep rates on hold on Thursday. Britain will publish GDP data for the second quarter and June on Thursday, with preliminary data showing the euro zone expanded faster than expected in the second quarter.