US Dollar Index declines sharply below 111.00 despite soaring hawkish Fed bets

• The DXY has surrendered 111.00 ahead of US NFP data.
• Soaring hawkish Fed bets have failed to support the DXY.
• The US jobless rate is seen unchanged at 3.7%.
• Yields have fallen sharply on the soaring market mood.

The US dollar index (DXY) has turned extremely volatile after opening as investors have shifted their focus toward the US Nonfarm Payrolls (NFP) data. The DXY has surrendered the critical support of 111.00 as the risk-off impulse has faded away and investors are channelizing their funds into the risk-sensitive assets.

That said, yields have fallen sharply despite the soaring bets over a hawkish stance expected by the Federal Reserve (Fed). At the time of writing, the 10-year US Treasury yields have fallen dramatically below 7.40%. As per the CME Fedwatch tool, 67.8% chances are favoring a fourth consecutive 75 basis points (bps) rate hike by the Federal in the scheduled monetary policy meeting in the first week of November.

On Wednesday, the DXY displayed a firm pullback after dragging to near 110.00. The DXY bulls got an adrenaline rush on upbeat US ISM Services PMI data and Automatic Data Processing (ADP) Employment Change figures. The Non-Manufacturing PMI landed at 56.7, higher than the expectations of 56.0. Also, the payrolls have increased to 208k vs. the expectations of 200k.

US NFP to display lucid employment status

Cues from US ADP Employment data indicate that the US Nonfarm Payrolls (NFP) numbers will remain upbeat. As per the expectations, the US economy has added 250k jobs in the labor market against the prior projection of 315k. The Unemployment Rate is seen unchanged at 3.7%. Apart from them, the Average Hourly Earnings data will hog the limelight. The labor cost index is expected to decline to 5.1%, 10 bps lower than the prior release.