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Investing.com – The dollar fell on Tuesday, but could rally in the near term as investors’ focus is likely to shift from the debt ceiling to the jobs report later this week, which could boost the prospect of a future Federal Reserve hike. Month.
The currency pair, which measures the greenback against a basket of six major heavy currencies, fell 0.14% to 103.99.
With the prospects of another 25 basis point hike from the Fed growing at next month’s FOMC meeting, the MUFG said Tuesday that “this week’s strong employment report will reinforce these expectations and encourage a strong near-term US dollar.”
Economists expect data on Friday to show the US economy added 180,000 jobs in May, while average hourly earnings for the month are seen down at 0.4% from 0.5%.
The increased probability has been reinforced by economic data showing that inflation, particularly that of basic services, remains hot.
“The lack of progress will continue to pressure the Fed to continue raising interest rates, although we would still argue that the Fed has already done enough by raising the policy rate to just over 5.0% especially as credit conditions are in place to tighten further at The future too.”, MUFG added.
The expected shift in focus away from passing the debt ceiling comes as markets mostly believe US lawmakers will vote the debt ceiling bill, or “Fiscal Responsibility Act,” into law and avoid default.
“Now that an agreement has been reached, it seems very likely that it will pass the House and Senate next week,” Goldman Sachs said in a note.
However, the debt ceiling bill is facing a race against time after Treasury Secretary Janet Yellen warned that June 5 would be the so-called X date, or the day when the US will not be able to pay its bills.