The dollar index held steady on Wednesday, consolidating after five straight sessions of gains as investors awaited fresh labour market and activity data to gauge the Federal Reserve’s next steps.
Treasury yields were mixed, with the 10-year remaining slightly above 4%, though soft readings could drag it below that threshold.
Markets are closely watching the ADP employment report and the ISM Services PMI, both due later in the day, for clues on the economy’s underlying strength.
Market participants expect private payrolls to show an increase of 25,000 in October after a surprise 32,000 drop in September, the steepest decline since early 2023. The services PMI is projected to edge up to 50.8 from 50, signalling marginal expansion.
Signs of a cooling labour market or renewed weakness in services activity could bolster expectations for a more dovish Fed stance, potentially weighing on the dollar and yields. Conversely, resilient data may reinforce the view that the central bank can afford to remain patient after last week’s quarter-point cut.
For now, traders assign roughly a 70% probability of another rate cut in December, down from near certainty before the latest FOMC meeting, as officials continue to stress data dependence amid data scarcity due to the prolonged government shutdown.
Leave a Comment