The U.S. dollar held steady, though heightened volatility is anticipated ahead of this week’s key economic data releases.
The Initial Jobless Claims figures, due later today, are expected to provide critical insights into the state of the labour market.
After last week’s surprise rise to 217,000, which surpassed expectations, market participants are projecting an additional increase to 220,000 this week, suggesting a potential slowdown in the labour market.
Looking ahead, tomorrow’s PMI Flash and Consumer Sentiment data could affect the direction of the greenback. If manufacturing remains in contraction and consumer sentiment weakens, the dollar could depreciate. However, stronger figures may heighten expectations that the Federal Reserve will adopt a more cautious stance, potentially supporting the U.S. currency.
Global economic developments are also drawing attention, particularly the upcoming Bank of Japan (BoJ) interest rate decision. A potential rate hike from the BoJ could result in a stronger yen, putting additional pressure on the dollar. However, weaker-than-expected economic data from Europe could counterbalance this impact, reinforcing expectations that the European Central Bank could maintain a dovish approach.
Meanwhile, in the bond market, U.S. Treasury yields remained subbed, with the 10-year note yield holding steady near 4.6%. As the Fed’s interest rate decision deadline approaches, it is likely that yields will experience increased volatility in the coming week. Furthermore, uncertainty surrounding Trump’s trade policies could fuel concerns and heighten volatility into the markets and could support US yields.
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