

Market Analysis
The U.S. dollar weakened on Thursday as traders began to anticipate more aggressive monetary easing by the Federal Reserve in response to signs of a cooling economy.
As of 04:10 ET (09:10 GMT), the Dollar Index, which measures the greenback against six other major currencies, was down 0.2% at 102.802, close to Monday’s seven-month low.
Dollar Declines Ahead of Jobless Claims
Last week’s disappointing nonfarm payrolls report heightened fears of an impending U.S. recession, which could prompt the Federal Reserve to cut interest rates sooner than expected.
JPMorgan has increased the likelihood of a U.S. recession by the end of the year to 35%, up from 25%, citing a weakening labor market.
This has led markets to fully price in a 50 basis points rate cut by the Federal Reserve in September, according to the CME's FedWatch tool.
Earlier this week, there was speculation about the possibility of an emergency rate cut before September, but the chances of that have diminished as market conditions stabilized.
More labor market data is due on Thursday, with the release of weekly jobless claims. Next week, the U.S. consumer price inflation report for July will be released, followed by the Federal Reserve's Jackson Hole Economic Policy Symposium the week after.
Euro Inches Higher
In Europe, the EUR/USD pair rose 0.2% to 1.0940, supported by the weaker dollar, with little economic data to influence trading.
The European Central Bank began cutting interest rates in June, and many expect further reductions in September.
ECB policymaker Olli Rehn stated on Wednesday that the central bank could continue to cut rates if confidence in the slowing inflation trend increases in the near future.
"Inflation continues to slow, but the path to the two percent target remains uncertain this year," Rehn said.
Meanwhile, GBP/USD edged up 0.1% to 1.2700, remaining close to the one-month low it reached on Tuesday.
The Bank of England’s quarterly bulletin, set to be released later today, may provide further insight into the central bank’s decision to cut rates last week.
Yen Strengthens as Carry Trade Weakens
In Asia, USD/JPY fell 0.3% to 146.19, following a 1.6% gain on Wednesday after Bank of Japan Deputy Governor Shinichi Uchida downplayed the likelihood of an imminent rate hike.
The pair had dropped sharply to a seven-month low of 141.67 earlier in the week, as a surprise rate hike by the BOJ prompted investors to unwind carry trades, where they borrow yen at low rates to invest in higher-yielding dollar assets, thus boosting the yen.
JPMorgan strategists noted in a Wednesday report that about three-quarters of the global carry trade has been unwound.
They also highlighted that the risk-reward for global carry trades is low due to the upcoming U.S. elections and potential repricing of funding currencies amid lower U.S. rates.
Elsewhere, USD/CNY dipped 0.1% to 7.1683, following a series of stronger-than-expected midpoint fixes that helped the yuan weather lackluster trade data released on Wednesday.
AUD/USD climbed 0.7% to 0.6559, with the Australian dollar gaining after Reserve Bank of Australia Governor Bullock indicated that the bank would not hesitate to raise interest rates further if inflation risks continue to rise.
Paraphrasing text from "Investing" all rights reserved by the original author.