Yesterday’s US Dollar (USD) rally lacked a clear catalyst beyond the selloff in global long-dated bonds – including the high-profile UK gilts. Rising debt concerns outside the US may have triggered some unwinding of abundant USD longs. Still, we doubt this will provide sustainable support to the dollar ahead of key data releases and imminent Fed easing, ING's FX analyst Francesco Pesole notes.

Downside risk for the DXY today

"Jobs-related data now carries even greater weight after Fed Chair Jerome Powell’s de facto admission that employment risks have overtaken inflation concerns. Market attention may also sharpen on data beyond official payrolls, especially given potential credibility questions after Trump’s appointment of a new BLS chief."

"Today’s JOLTS report is therefore important. Job openings are expected to have edged lower in July, but we are still well above the seven million average for 2018-19, which could warrant major concerns. Changes in layoff figures could have a bigger impact. So far, the narrative points to job market stagnation after a few exceptional years; layoffs need to remain low to avoid a faster dovish repricing."

"The Fed’s Beige Book, also due today, will provide regional insights – particularly on tariff-related price pass-through. We’ll also hear from hawkish-leaning FOMC voter Alberto Musalem. We don’t see a strong fundamental case for yesterday’s dollar momentum and expect some downside risk for the DXY today as that move unwinds ahead of Friday’s payrolls."