US Dollar: Labour data and hawkish risks in focus – Deutsche Bank

Deutsche Bank strategists outlines a United States (US) macro backdrop where the Federal Reserve (Fed) held rates but three officials dissented for a hike, keeping inflation concerns alive. They expect two further 25bp increases this year and closely watch upcoming labour and activity data. They note futures pricing of additional 2026 Fed moves and a steeper Treasury curve, underscoring ongoing policy‑driven Dollar dynamics.

Fed path tied to labour data

"The week ahead will be dominated by the US labour market, with the JOLTS report tomorrow, the ADP employment survey on Wednesday, and building up to Friday’s July employment report. "

"Looking at the US and then the rest of the world in more detail, attention will centre on whether incoming data reinforce the view that the US labour market remains resilient. Our economists expect Friday’s July payrolls report to show employment growth of +65k, modestly above June’s +57k reading, while private payrolls are also expected to rise by +65k after +49k previously."

"The unemployment rate is forecast to remain at 4.2%, although risks are skewed towards a rounding up to 4.3% if labour force participation rebounds after last month’s sharp decline. Average hourly earnings are expected to increase by +0.3% month-on-month, unchanged from June, while average hours worked are forecast to hold at 34.3 hours. If realised, those outcomes would leave our economists’ payroll proxy for nominal income growth unchanged at 4.4% year-on-year."

"Before Friday’s report, several labour market indicators will help shape expectations. The JOLTS report (tomorrow) and the ADP employment survey (Wednesday) will be closely watched, with our economists expecting ADP employment growth of +60k after +98k previously."

"Activity indicators will also feature prominently. The ISM manufacturing index (today) is expected to improve to 54.1 from 53.3, while the ISM services index (Wednesday) is forecast at 54.3, little changed from June’s 54.0. Productivity data (Thursday) should provide another read on underlying economic momentum, with our economists forecasting Q2 nonfarm productivity growth of +3.0% and unit labour costs rising by +0.5%."