The dollar failed to strengthen even after record employment data: why the market doesn't trust the Fed

Author and Editor-in-Chief: Vitaliy Kisterny 08.09.2026 07:05:00

On September 7, 2026, the dollar continued to trade near three‑month lows, despite explosive U.S. labor market data. In August, the U.S. economy added 162,000 jobs—three times the forecast—while unemployment remained at 4.1%.

It seemed this should have been a powerful catalyst for the dollar's appreciation. However, the DXY index, which fell to 98.55 on September 4, remained around 99.09 by September 7 and failed to settle above that level. The market was indifferent: strong labor statistics removed the barrier to rate hikes but did not provide grounds for a confident strengthening of the U.S. currency.

Traders estimate the probability of a Fed rate hike at the September 15–16 meeting at 57–58%, yet even that does not help the dollar. What is holding back the “American”—let’s examine step by step.

Photo: © Belnovosti / U.S. dollar. Author Vitaliy Kisterny
Strong employment data: why it didn't help the dollar

President Donald Trump publicly urged the Federal Reserve to ease monetary policy, saying that a strong economy should have low rates. He threatened that if the central bank does not cut rates, he will shut down trade with the countries with which the United States has deficits. This undermines confidence in the Fed’s independence and reduces the dollar’s attractiveness. Analysts note that “the White House is out of touch with reality.”

Third factor: tightening by other central banks

Even if the Fed raises rates in September, the gap in monetary policy between the United States and other countries will not be as large as before. The European Central Bank is expected to raise its rate to 2.75% on Thursday, and markets price in a 75% probability of another hike to 3.0% by December. The Bank of Japan is also preparing for a rate increase on September 18. As BBH’s head of global market strategy Elias Haddad noted, “even if the Fed’s September hike becomes a decisive move, we doubt the dollar will reach new cyclical highs. Tightening by other central banks limits policy divergence.”

What’s next: CPI will decide everything

The coming days will be decisive for the dollar. On Friday, September 11, U.S. inflation data (the Consumer Price Index) will be released. The consensus forecast expects inflation to remain at the July level of 3.4%, while the core measure is expected to slow to 2.4%.

According to analysts, these figures will be decisive for the Fed’s decision. A “hot” CPI report would almost cement a rate hike in September and strengthen the dollar. A “cool” report would bolster arguments for keeping rates unchanged and make the dollar vulnerable to a shift toward a dovish stance.

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