FOREX-Dollar eases as investors await inflation data for Fed clues

Reuters

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    * Dollar falls; Aussie and Kiwi gain
    * Traders price in 69% chance of 75 bps Fed hike in Sept

 (Adds analyst quotes, updates prices)
    By John McCrank
    NEW YORK, Aug 8 (Reuters) - The dollar eased on Monday,
giving back some of the gains it made following Friday's
blockbuster U.S. jobs report, as investors looked ahead to
Wednesday's inflation data for more clues about the Federal
Reserve's next steps.
    U.S. job growth rose much more than expected in July, data
showed on Friday, lifting the employment level above its
pre-pandemic mark and calming fears that the economy was in
recession. Investors read the data as a indication the Fed could
raise interest rates more aggressively to combat inflation.
 urn:newsml:reuters.com:*:nL1N2ZH1X9
    The upbeat mood carried into Monday, with European stocks
rising and North American stocks markets opening higher before
pulling back to around even in choppy trading as investors'
attention turned to company earnings.  urn:newsml:reuters.com:*:nL4N2ZK25U
    "We're seeing some broad dollar weakness because the risk
vibe is fairly buoyant," Erik Bregar, director of FX & precious
metals risk management at Silver Gold Bull, said of the safe
haven currency.
    The dollar index, which measures the safe haven currency
against a basket of peers, was at 106.43 at 2:50 p.m. eastern
time (1850 GMT), down 0.2%, compared with Friday's 10-day high
of 106.930  =USD .
    U.S. Treasury yields eased after spiking of Friday, while
traders were pricing in a 69% chance of the Fed raising rates by
75 basis points (bps) at its September meeting, according to
Refinitiv data  IRPR .
    Markets are looking ahead to U.S. inflation data for July,
which will be released on Wednesday. Analysts polled by Reuters
expect annual inflation to have eased to 8.7% in July from 9.1%
previously.
    "With the downturn in the dollar not coinciding with a
dovish repricing in U.S. money markets, it seems the bar for a
CPI induced dollar rally is being lowered today," said Simon
Harvey, head of FX analysis at Monex Europe.    
    Fed Governor Michelle Bowman said on Saturday that the U.S.
central bank should consider more 75 bps hikes at coming
meetings to bring inflation back down.  urn:newsml:reuters.com:*:nL1N2ZH1XZ   
    "The U.S. dollar has been supported by the combination of
stronger U.S. economic data releases and hawkish comments from
regional Fed presidents that have encouraged market participants
to push back expectations for a dovish policy pivot from Fed,"
MUFG currency analysts Derek Halpenny and Lee Hardman said in a
note to clients.
    High inflation combined with Friday's labor market reading
could push the market to fully price in 75 basis points of Fed
hikes for September, according to Tim Graf, head of EMEA macro
strategy at State Street.
    Currencies seen as barometers of risk, such as the
Australian and New Zealand dollars, made gains, with the Aussie
up 0.97% at $0.6978 and the Kiwi up 0.62% at 0.62825.  AUD=D3 
 NZD=D3 .
    The dollar was down 0.12% versus the yen, with the pair
changing hands at 134.835  JPY=EBS . 
    Euro zone bond yields fell back down after gaining following
the jobs data on Friday. Italian bonds appeared to brush off a
decision by Moody's to lower Italy's ratings outlook.
 urn:newsml:reuters.com:*:nL8N2ZK1DA
    The euro  EUR=EBS  edged down 0.07% to $1.01865.
    The British pound ticked 0.02% higher to $1.2075  GBP=D3 .
    UK Foreign Secretary Liz Truss - who is expected to replace
Boris Johnson as prime minister next month - has said she plans
to hold a review of the Bank of England's mandate.
 urn:newsml:reuters.com:*:nS8N2YA04X urn:newsml:reuters.com:*:nL8N2ZH1XI

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by John McCrank; additional reporting by Elizabeth
Howcroft in London; Editing by Alex Richardson, Barbara Lewis
and Marguerita Choy)
 ((john.mccrank@thomsonreuters.com Twitter @jmccrank; 1 646
223-6643; Reuters Messaging:
john.mccrank.thomsonreuters.com@reuters.net))

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