The United States (US) dollar continued to decline, falling for the third day in a row, as currency markets braced for the announcement of US jobs data (NFP) which is expected to influence the size of interest rate cuts by the Federal Reserve (Fed) this month.
Amid growing speculation that a disappointing jobs report could prompt the Fed to cut interest rates by 50 basis points, the dollar came under pressure, while most Asian currencies, led by the yen, strengthened in early reaction.
This week's US jobs report (NFP) indicator has sparked unprecedented levels of anticipation among currency traders, with the dollar's volatility index against other major currencies reaching its highest level since March 2023.
"Risk Off" sentiment a key measure of market position has shown growing bearish sentiment against the dollar.
Market players now expect a 35% chance of a rate cut of 50 basis points at the Federal Reserve meeting to be held on September 17-18. Even so, a reduction of 25 basis points is still the main expectation among traders and economists.
The yen is expected to experience significant movement if US jobs data tonight change expectations for a more aggressive rate cut by the Fed.
We at Saracen Markets see that the yen has the potential to test the August high against the dollar, should the U.S. Unemployment Rate report rise to 4.4%.
In addition, market players will wait for official statements from the two main Federal Reserve officials, New York Fed President John Williams and Fed Governor Christopher Waller, who are scheduled to speak after the announcement of the employment data report. Their remarks will be scrutinized for any indication of the Fed's policy direction.
