Dollar rebound skips a beat on FOMC ambivalence

After a strong run since mid-May, the US dollar has stalled this week after a run of mixed data and Fed officials striking a cautious tone in recent speeches pushed US interest rate expectations a touch lower. The latest innovation in central bank communication from FOMC members is to suggest that it may be appropriate to “skip” a rate hike at the upcoming June FOMC meeting (not to be confused, of course, with a “pause”, although the natural suspicion is that that will be the eventual outcome). And, while another above-consensus non-farm payrolls figure has led to a bit of rebound in rate expectations and the dollar, the moderation in wage growth and rise in the unemployment rate (along with yesterday’s downbeat ISM survey) are consistent with labour market conditions and price pressures easing. So, policymakers still appear on track for their June skip, although the CPI data released on the eve of the FOMC week after next could still throw a spanner in the works.