Lingering doubts that the Fed is done raising rates is still offering the Dollar support.

Seasonality for the Dollar is bullish in August. Last year’s gain in the DXY of 2.6% was the fourth largest of the calendar year and followed the double digit ascent in 2y and 10y Treasury yields before Jackson Hole. US bond yields have risen in August in each of the last three years.  

Hawkish Fed comments caught out investors in August last year and caused Treasuries to sell off and the Dollar to rally ahead of the Jackson Hole symposium. The price action this time may be determined by the outcome of CPI on 10th August.

Fundamentally, the third successive drop in jobless claims last week to 221K skews the risk to the upside for NFP on Friday. We forecast a rise of 190K and a decline in the unemployment rate to 3.5%. A lower jobless rate after a run of stronger growth data last week could give a nudge to the probability of a September hike.