US Dollar Enjoys More Strength – Hopes of Rapid Economic Recovery Support
Aiswarya Gopan • 1 min read
Ahead of the release of June’s non-farm payrolls report, the US dollar continues to trade strong against its major rivals, amid a wave of optimism in markets for a strong employment report which could support expectations for sooner than expected monetary tightening by the Fed. At the time of writing, the US dollar index DXY is trading around 92.55.
While economists have forecast a jump to 700k jobs for last month, unofficial estimates peg the figure even higher, which could lend a strong boost to hopes for tapering. In addition, a stronger than expected jobs number could propel further bullish moves in the US dollar and send it higher later in the day.
Additional optimism in the greenback was also driven by strong projections for economic growth for the US by the IMF. The IMF has upgraded its growth outlook for the world’s largest economy, forecasting the 2021 US GDP to touch 7%, far higher than the previous projection made in April for 4.6% growth.
However, the IMF did caution about the labor market conditions which could weigh on the economic recovery. In its official statement, the IMF notes, “Indicators suggest significant labor market slack remains which should serve as a safety valve to dampen underlying wage and price pressures.”
The US dollar is also enjoying support from a steep rise in car sales over the second quarter of the year, a sign of increasing consumer consumption and optimism in economic conditions. The fiscal stimulus measures, low interest rates and an increased demand for personal transportation amid the pandemic have driven sales of cars, especially SUVs and electric vehicles soaring.