**US Dollar Price Forecast: Stabilizes After NFP, CPI Focus; GBP/USD and EUR/USD Outlook
By Crispus Nyaga | FXEmpire.com**
The US dollar experienced noteworthy volatility in the past week, reacting to a slate of economic data led by the June Nonfarm Payrolls (NFP) report. Despite a weaker-than-expected jobs report and a downward revision of past figures, the dollar managed to stabilize amid shifting market expectations for Federal Reserve policy. As traders enter a new week, attention now turns to the looming Consumer Price Index (CPI) report, which could provide fresh direction for major FX pairs including GBP/USD and EUR/USD.
**US Dollar Struggles After Mixed NFP, Finds Ground**
The June NFP report released on Friday reflected a labor market beginning to moderate:
– Nonfarm Payrolls rose by 206,000 jobs, higher than the 190,000 consensus
– Previous months were sharply revised down, with May now at 218,000 (from 272,000) and April revised to 108,000 (from 165,000)
– The unemployment rate ticked up to 4.1%, its highest level since November 2021
– Average hourly earnings rose by 0.3%, in line with forecasts
This mixed report initially pressured the greenback as investors weighed whether a softer labor market could justify a Federal Reserve rate cut as early as September. However, buying interest returned as markets acknowledged that, while the labor market is softening, it is not signaling outright weakness that would spur aggressive easing by the Fed.
The DXY Dollar Index hit lows near 104.8 after the report but steadied above the 105.0 handle to start the week, reflecting a cautious but resilient sentiment as traders await more compelling data points.
**Policy Path Uncertain: Markets Eye Fed’s Next Move**
Following the jobs data, traders recalibrated their expectations for future Fed action. Fed funds futures now price in roughly a 75% chance of a rate cut by September, up from around 60% the previous week. However, FOMC members have maintained a hawkish tone, emphasizing a data-dependent approach that keeps rate paths ambiguous.
Key factors shaping Fed policy in the coming months:
– Persistent above-target inflation, especially in core services
– Early signs of labor market moderation but no evidence of a rapid deterioration
– Global monetary policy divergence, with the European Central Bank and Bank of England also signaling caution on rate cuts
As a result, the US dollar maintains a bid as the Fed remains the most cautious among G7 central banks, balancing the risk of reigniting inflation against concerns about a hard landing.
**CPI Report in Focus: Pivotal Data for Policy and FX Markets**
The main event of the week will be the release of the June Consumer Price Index (CPI) on Thursday. Economists anticipate:
– Headline CPI rising 0.1% month-on-month, with the annual rate slipping to 3.1% from 3.3%
– Core CPI to increase by 0.2% month-on-month, maintaining a 3.4% annual pace
A softer reading could build the case for a September rate cut and cap dollar strength, while a stubbornly high print would embolden hawkish Fed rhetoric and potentially fuel a greenback rebound.
Key risks for markets include:
– Upside inflation surprises in shelter and core services
– Downside risks from falling used car prices, lower gasoline costs, and slower wage growth
With the labor market softening but inflation not yet decisively beaten, any significant deviation from consensus could jolt rate expectations and drive substantial volatility across major pairs.
**Dollar Technical Outlook: DXY Stabilises, Cautiously Bid**
On the technical front, the US Dollar Index (DXY) appears to have found support near the 104.5-104.7 region, coinciding with both the mid-May
Read more on GBP/USD trading.