US Dollar: September hike odds stay elevated – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar has recovered most of its recent pullback as Fed funds futures price a 67% chance of a 25 bps rate hike on September 16 and 60 bps of tightening over twelve months. Upcoming ISM manufacturing, JOLTS and August CPI are seen as key tests, with US data expected to keep a September hike in play and support the Dollar.

Fed pricing supports firm Dollar

"USD recovered most of yesterday’s pullback. Fed funds futures price in 67% odds of a 25bps hike on September 16 and imply 60bps of tightening over the next twelve months. Pricing will remain elevated into the September meeting, with the August CPI on September 11 the decisive test."

"Today’s US data should keep a September hike firmly in play and underpin USD."

"August ISM manufacturing index (3:00pm London, 10:00am New York). The headline index is expected at 55.2 vs. 55.6 in July consistent with resilient manufacturing activity. Importantly, the Prices Paid index is seen falling to a six-month low at 70.8 vs. 71.1 in July signaling diminishing upside inflation risk."

"July Job Openings and Labor Turnover Survey (JOLTS) (3:00pm London, 10:00am New York). The JOLTS print is expected to reinforce the US labor market’s low hire, low fire backdrop."

"Bessent also pushed back against claims that rising Treasury yields reflected mounting concerns over US fiscal policy, noting the outperformance of US 10-year Treasuries relative to other major bond markets. However, relative outperformance does not make the fiscal risk disappear. Rising interest expense will ultimately push up the US Treasury term premium, leaving USD more vulnerable to periods of fiscal stress."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)