The US Dollar (USD) faced challenges in garnering demand early Tuesday, following a notable decline against its major counterparts on Monday. Investors are closely watching the US economic calendar, particularly the NFIB Business Optimism Index for August, expected to provide insights into small business sentiment. More significantly, the Bureau of Labor Statistics is set to release preliminary benchmark revisions to employment data, which could have implications for monetary policy.
Recent performance data illustrates the USD’s struggles over the past week, with significant weakness observed against the Swiss Franc, and varying changes against other major currencies. The table documenting the percentage changes reflects a 0.44% decline against the Euro, 0.15% against the British Pound, and a more pronounced drop of 1.04% against the Swiss Franc.
Pressure on the USD has been fueled by growing sentiments that the Federal Reserve may implement multiple interest rate cuts within the year. This speculation contributed to a 0.3% decrease in the USD Index, marking its lowest closing level since late July. In contrast, US equity markets displayed resilience, with Wall Street’s main indexes experiencing moderate gains, and early Tuesday trading showing stock index futures in positive territory.
In Australia, economic indicators reflected a downturn, with Westpac’s Consumer Confidence dropping to -3.1% in September, down from 5.7% in August, and the National Australia Bank’s Business Confidence Index declining to 4 from 8. The Australian Dollar (AUD) showed an initial uptick but appeared to settle into a consolidation phase around 0.6600.
Political developments in France saw Prime Minister François Bayrou lose a confidence vote, a situation anticipated by analysts, with President Emmanuel Macron expected to nominate a successor shortly. The EUR/USD pair benefited from the overall USD weakness, managing to maintain positive momentum and fluctuate just above 1.1750 during the European trading session.
Commodity markets also saw notable movements, with gold prices continuing their upward trajectory, reaching a record near $3,660 before experiencing a slight correction below $3,650 in the European morning. The British Pound (GBP) saw modest gains, trading above 1.3550, amid USD softness.
Meanwhile, the USD/JPY pair continued to face bearish pressure, moving toward the 147.00 level. Notably, Japan’s trade negotiator indicated that US tariffs on Japanese goods, including automobiles, are scheduled to be reduced by September 16.
Regarding employment metrics, Nonfarm Payrolls (NFP) figures are a critical component of the US Bureau of Labor Statistics’ monthly jobs report, tracking employment growth in the US, excluding the farming industry. Strong NFP results typically correlate with increased consumer spending and positive economic sentiment, influencing Federal Reserve decisions on interest rates. A higher NFP can suggest more robust employment, leading to higher inflation and potential monetary tightening by the Fed, which in turn supports the USD.
Conversely, low NFP figures may indicate labor market challenges, prompting the Fed to consider rate cuts to stimulate growth. Additionally, NFP figures often inversely affect gold prices, as stronger employment data usually strengthens the USD, thereby reducing demand for gold, which is traditionally priced in USD. However, the full impact of NFP is nuanced, as other components of the employment report—such as Average Weekly Earnings and participation rates—can also sway market reactions.
