Investors Start Week on a Cautious Note - US Dollar Holds at One-Month Low

Investors Start Week on a Cautious Note – US Dollar Holds at One-Month Low

Posted Monday, August 2, 2021 by
Aiswarya Gopan • 2 min read

The US dollar is starting the brand new trading week in a cautious mood, trading close to the lowest levels seen since a month against its major rivals, as investors wait for a host of important economic data releases through the week. At the time of writing, the US dollar index DXY is trading around 92.

Over the past week, the dollar index lost around 0.88% of its value after the Fed played down its hawkish mood from June’s FOMC, insisting that the labor market needs to post a greater recovery before a rate hike can be considered. After trading bullish through most of July, the latest FOMC dented traders’ expectations that the Fed would taper asset purchases soon and start hiking interest rates sooner than previously planned.

This week, all eyes will be on the key non-farm payrolls figure for July, scheduled to release on Friday, to assess the condition of the US labor market. Expectations as per a recent Reuters poll is for an addition of 962k jobs for the month of July, the highest spike in nearly a year. Meanwhile, the unemployment rate is expected to decline from 5.9% in June to 5.7% in July.

A strong reading in line with this forecast or better than this could infuse strength in the US dollar and once again heighten expectations for the Fed to look into tightening its monetary policy earlier than anticipated. On the other hand, a dismal NFP report will reinforce the Fed’s dovish tones and drive investors away from the greenback and towards other currencies.

In addition to the July NFP report from the US, traders will also keep an eye on the BOE’s policy announcement scheduled on Thursday. Before that, however, watch out for the RBA meeting on Tuesday when traders expect the Aussie central bank to reverse its decision to taper its monetary stimulus on the back of the latest round of lockdowns across the nation.

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