Asian session review: the US dollar is showing a weak increase

During today's Asian trading, the US dollar rose slightly against major currencies after yesterday's fall caused by the results of the Fed meeting and the statement by Central Bank Governor Powell.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.08% to 104.17. Yesterday, the index fell by 0.44%, as the Fed left interest rates unchanged, but signaled the beginning of the monetary policy easing cycle in September. Markets have been fully pricing in a 0.25% rate cut in September for some time and added to wagers of the Fed going big even after Powell said policymakers are not thinking about a 0,5% rate cut "right now". According to the CME FedWatch Tool, markets see a 100% probability of a rate cut in September, and a 100% probability of monetary policy easing in November, with about 72 basis points worth of cuts priced in for the rest of the year. The next event that will affect these expectations will be tomorrow's publication of data on the US labor market. Although job growth remained above 200,000 in June, the increase over the previous two months was significantly revised downward (-111 thousand in net terms), and the June increase was mainly concentrated in the less sensitive to cyclical changes in sectors of public administration and healthcare. The most obvious sign of the cooling of the labor market was the increase in unemployment to 4.1%, which is almost 0.5% higher than at the beginning of the year. The expected increase in the number of jobs by 175 thousand in July will still be a decent increase, but it will emphasize that the overall situation in the labor market is deteriorating. According to a number of indicators, including the unemployment rate, the rate of layoffs, the level of temporary workers and small business hiring plans, the labor market is not only weaker than a year or two ago, but also weaker compared to its pre-pandemic level. As a result, the pressure on wages has decreased. The average hourly wage is expected to have increased by 0.3% in July, bringing the annual rate to 3.7% (more than a three-year low). Meanwhile, the unemployment rate is likely to remain unchanged at 4.1%.

The pound fell by 0.5% against the US dollar, reaching its lowest level since July 10, as investors adjust their positions ahead of the announcement of the results of the Bank of England meeting. Currently, traders estimate a roughly 62% chance of a 0.25% rate cut by the Central Bank. That is similar to the odds on Wednesday and up from around 58% at the start of the week.