WHY IS USD HOLDING FIRM AFTER A WEAK NFP REPORT?
The US Dollar remains supported despite a weaker-than-expected September Nonfarm Payrolls (NFP) report, as markets continue to focus on inflation risks and elevated Treasury yields rather than employment data alone.
The softer labor-market data reduced expectations for near-term Federal Reserve rate hikes. However, US Treasury yields remain elevated, supporting the Dollar as markets continue to assess the balance between inflation pressures and future monetary policy expectations.
According to Societe Generale’s Kenneth Broux, the weaker payrolls report has reduced expectations for immediate Fed tightening, but it is “not a game changer for the hawkish predisposition of the Fed – inflation is the bogeyman.”
Markets continue to assess inflation trends as a key driver for Fed policy expectations. The latest data showed the ISM Services PMI at 54.9, slightly below expectations of 55.0 and the previous reading of 55.4, while Treasury yields remain close to recent highs.
The US Dollar Index (DXY) trades near 102.20, maintaining a positive short-term structure. From a technical perspective, DXY remains above the 20-day EMA near 100.96, while the RSI (14) at 76.10 indicates strong momentum but also shows overbought conditions.
The next key focus for markets will be the release of the September FOMC meeting minutes, which may provide further insight into policymakers’ views on inflation, interest rates and the future path of monetary policy.
For market participants, the key factors remain Treasury yields, inflation expectations, Fed policy signals, FOMC minutes, DXY near 102.20, the 102.54 resistance level and the 100.96 support area, which may provide further context for the near-term direction of the US Dollar.
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