Dollar Holds Steady as Markets Turn to U.S. CPI After Weak Jobs Data

The U.S. dollar held broadly steady on Tuesday as investors shifted their focus from last week’s unexpectedly weak jobs report to the upcoming U.S. inflation data.

The Dollar Index was little changed around 99.84 after gaining 0.3% in the previous session. The yen also remained under pressure, with USD/JPY trading near 159.30 after Japanese and U.S. authorities previously intervened to support the Japanese currency.

U.S. payrolls fell by 23,000 in July, sharply missing expectations for an increase of around 80,000. The figures also included significant downward revisions to previous months, prompting markets to reduce expectations for further Federal Reserve tightening.

The focus is now on Wednesday’s Consumer Price Index report. Investors will assess whether inflation is slowing enough to change expectations for the Fed’s policy path later this year.

Higher oil prices are adding another complication. Crude prices have moved higher as uncertainty over negotiations involving Iran and shipping through the Strait of Hormuz has increased. A prolonged disruption could keep energy costs elevated and make it harder for inflation to decline.

The Australian dollar was relatively stable after the Reserve Bank of Australia kept its cash rate unchanged at 4.35%, as expected. The central bank continues to balance persistent inflation against signs of weaker economic activity.

What to Watch

Markets will focus on the U.S. CPI report for fresh signals on inflation and interest-rate expectations. Producer prices and retail sales data later in the week could provide additional clues about the direction of U.S. monetary policy.

For currency markets, a softer inflation reading could reinforce expectations for a less restrictive Fed and weigh on the dollar, while a stronger-than-expected CPI print could support the greenback.