USD: Defensive bias as data test Fed – BBH

FXStreet Insights Team FXStreet

Brown Brothers Harriman (BBH) expects the Dollar to trade defensively this week as US labor market softness and easing inflation support Fed funds futures pricing 50 bps of cuts by year-end. The bank highlights January NFP and CPI as key tests of Chair Powell’s claim that employment-inflation tensions have diminished, with wage and super core services inflation closely watched.

Jobs, inflation to steer Dollar

"USD will likely trade on the defensive this week as ongoing US labor market fragility and easing inflation pressures support Fed funds futures pricing 50bps of cuts by year-end."

"January CPI is due Friday. Headline CPI is expected to rise by 0.3% m/m for a third straight month and drop 2.5% y/y (lowest since May 2025) vs. 2.7% in December."

"More importantly, upside risks to prices are fading and leaves scope for the Fed to ease policy."

"Additionally, wage growth is running around sustainable rates consistent with the Fed’s 2% inflation goal given annual non-farm productivity growth of around 2%."

"Average hourly earnings are seen at 3.7% y/y in January vs. 3.8% in December while the Employment Cost Index (ECI) wages & salaries - the Fed’s favorite wage data - was 3.5% y/y in Q3."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold: Tempered hawkish Fed bets lift it near $4,500

Gold price holds onto Thursday’s gains at around $4,470 as traders trim Fed’s interest rate expectations. Hawkish Fed bets cool down after expression of confidence from Fed’s Waller that price pressures are decelerating. Investors keenly await the US NFP data for August.

Bitcoin clears $80,000 on reduced rate hike odds – Zcash, Ethena rise

Bitcoin is trading above $80,000 on Friday, sustaining the broader cryptocurrency market's risk-on sentiment. Federal Reserve (Fed) Governor Christopher Waller signaled support for a potential pause in interest rates on Thursday, lowering the odds of a September rate hike to 50%. Zcash (ZEC) and Ethena (ENA) emerge as top performers over the last 24 hours.

NFP preview: Can jobs data ease rate hike fears?

As we move to the end of the week, the focus shifts to the macro data, and to the strength of the labour market in the US. August payrolls are released on Friday at 1330 BST, and the market is expecting a reading of 58k. The unemployment rate is expected to remain steady at 4.1% and wage growth is expected to moderate slightly to 3% last month, down from 3.2%.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.