# Dollar on guard as US inflation test looms Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-08-07 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: US Dollar defensive as US inflation test looms Meta Description: Stay updated on the latest market movements as the Dollar watches US inflation data. Will the Federal Reserve keep rates higher for longer? Find out here. URL: https://financedigest.com/dollar-on-guard-as-us-inflation-test-loomshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-08-07t015114z2lynxmpej7600srtroptp4global-forex-dollar-1736813692921-compressed.jpg) # Dollar on guard as US inflation test looms By Rae Wee SINGAPORE (Reuters) – The dollar was on the defensive on Monday after a mixed U.S. jobs report provided little directional conviction and as [market focus turned to inflation data from the world’s](https://www.financedigest.com/world-shares-rally-as-china-offers-markets-a-hand.html "World shares rally as China offers markets a hand") two largest economies due this week. The U.S. [economy added fewer jobs than expected](https://www.financedigest.com/global-fuel-injector-cleaner-market-emerging-economies-expected-to-influence-growth-until-2031.html "Global Fuel Injector Cleaner Market: Emerging Economies Expected to Influence Growth until 2031") in July, data on Friday showed, but it recorded solid wage gains and a decline in the unemployment rate. While the dollar fell to a one-week low against a basket of currencies in the aftermath of the data, its losses were capped as the report pointed to a still-tight [labour market](https://www.financedigest.com/spains-labour-market-resilient-as-unemployment-drops-in-nov.html "Spain’s labour market resilient as unemployment drops in Nov"), suggesting the Federal Reserve may need to keep rates higher for longer. The U.S. [dollar index was last 0.08% higher](https://www.financedigest.com/dollar-higher-on-risk-aversion-euro-revisits-parity.html "Dollar higher on risk aversion; euro revisits parity") at 102.14, edging away from Friday’s low of 101.73. Sterling fell 0.11% to $1.2737, while the euro lost 0.14% to last stand at $1.0994. There was a narrative in there for everyone, depending on your bias,” said Pepperstone’s Head of [Research Chris Weston of the jobs report](https://www.financedigest.com/plywood-market-to-reach-a-valuation-of-us-115-bn-by-2028-comprehensive-research-report-by-fmi.html "Plywood Market to reach a valuation of US$ 115 Bn by 2028 – Comprehensive Research Report by FMI"). We are seeing a [cooling of the labour market](https://www.financedigest.com/uks-hot-labour-market-cools-and-inflation-eats-pay.html "UK’s hot labour market cools and inflation eats pay"), but it’s not collapsing. It’s doing what we hoped it would do.” U.S. [inflation data](https://www.financedigest.com/hot-u-s-inflation-data-reignites-global-selloff.html "Hot U.S. inflation data reignites global selloff") is due on Thursday, where expectations are for core inflation to have risen 4.7% on an annual basis in July. “It’s hard to see the pullback being big across the dollar pairs, because fundamentally the U.S. has still got the best growth, you got a [central bank](https://www.financedigest.com/central-banks-opt-for-shock-and-awe-to-tame-inflation.html "Central banks opt for shock and awe to tame inflation") which is still very much data dependant, and I think there are risks this week that the CPI number comes out above expectations,” said Weston. Also due this week is [China’s July](https://www.financedigest.com/china-july-industrial-profits-down-as-covid-curbs-heatwaves-hit.html "China July industrial profits down as COVID curbs, heatwaves hit") inflation print on Wednesday, with traders on the lookout for further signs of deflation in the world’s second-largest economy. (We) see the country’s headline CPI to register a deflation this July after growth in [consumer prices](https://www.financedigest.com/german-eu-harmonised-consumer-prices-up-8-8-y-y-in-august.html "German EU-harmonised consumer prices up 8.8% y/y in August") stalled in June,” said MUFG analysts in a note. While the narrative of soft recovery in China likely remains intact in the [short term](https://www.financedigest.com/liquidity-ratios-assessing-a-companys-short-term-financial-health.html "Liquidity Ratios: Assessing a Company’s Short-Term Financial Health"), continued support from the Chinese government should boost the yuan. The [Chinese yuan hovered near a two-week low](https://www.financedigest.com/unilever-sees-chinese-consumer-confidence-at-historical-low-point.html "Unilever sees Chinese consumer confidence at ‘historical low point’") on Monday, with its offshore counterpart last 0.2% lower at 7.2042 per dollar. On Friday, a Chinese official said during a press conference by the [state planner that liquidity in the country’s banking](https://www.financedigest.com/chinas-state-banks-seen-selling-dollars-offshore-to-slow-yuan-drop-sources.html "China’s state banks seen selling dollars offshore to slow yuan drop – sources") system would be kept reasonably ample, though investors were left wanting for more amid Beijing’s slow roll out of support to revive its economy. Elsewhere, the Australian [dollar edged 0.04% lower to $0.6568, while the New Zealand dollar gained](https://www.financedigest.com/dollar-gains-after-fitch-watch-heightens-debt-ceiling-jitters.html "Dollar gains after Fitch watch heightens debt ceiling jitters") 0.01% to $0.60985. The yen fell nearly 0.3% to 142.13 per dollar, after [hitting a one-week high of 141.52 per dollar](https://www.financedigest.com/euro-falls-on-gloomy-pmi-data-dollar-hits-2-month-high.html "Euro falls on gloomy PMI data, dollar hits 2-month high") in early Asia trade. The Bank of Japan debated growing prospects of sustained [inflation](https://www.financedigest.com/bank-of-ireland-says-it-has-fixed-glitch-that-sparked-flurry-of-withdrawals.html "Bank of Ireland says it has fixed glitch that sparked flurry of withdrawals") at their July meeting with one board member saying wages and prices could keep rising at a pace “not seen in the past,” according to a summary of opinions released on Monday. (Reporting by Rae Wee; Editing by Jacqueline Wong) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---