Dollar waits on Hormuz deal, payrolls to shape September Fed expectations

The dollar loitered around three-week lows against its major peers on Thursday as investors awaited news of a deal to reopen the Strait of Hormuz. President Trump has said a deal is imminent, though investors have learnt all too well not to take his comments at face value.

The key sticking point appears to remain whether Iran will be willing to relinquish control over traffic through the Strait.

The longer a deal remains elusive, the more likely the dollar is to catch a bid - but for now, market participants seem content to stay upbeat.

Iran war aside, all eyes now turn to this afternoon's payrolls report for July, which takes on huge importance given that markets are completely torn down the middle as to whether or not the Fed will raise rates in September. Consensus points to no change in the unemployment rate and a job creation number around the 80k mark.

While we think that this would be solid enough to confirm that the jobs market remains in a "low hire, low fire" state, we do not think that it would be enough to validate the hawkish dissenters at the July FOMC meeting.

Instead, a print in that range would likely reinforce the case for patience, shifting the market's focus onto developments in the Iran conflict and the upcoming CPI prints.