Ahead of today's employment report, financial markets are assigning roughly a 28% probability to a Federal Reserve rate increase at the 29 July policy meeting. Following a more hawkish-than-expected FOMC meeting, interest rate futures have shifted to reflect higher expected rates. A strong payrolls result particularly one exceeding 180,000 jobs, could significantly increase expectations of a July rate hike, potentially lifting the implied probability above 50%.
The payrolls report is also expected to be the next major catalyst for the US dollar until the release of June inflation data. The US Dollar Index is trading at its highest level in 14 months and has been the strongest-performing major currency over the past year, gaining around 2.5% in the last month alone. Its breakout above the 100.50 level two weeks ago reinforced the broader bullish outlook and suggests the potential for additional upside.
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