US Dollar Enjoys Strength as Markets Hope For Strong NFP Report
Aiswarya Gopan • 1 min read
The US dollar is enjoying some strength in early trading on Friday as markets anticipate positive employment data from the US later in the day when the nonfarm payrolls report for July comes out. At the time of writing, the US dollar index DXY is trading around 92.32.
So far this week, the reserve currency has strengthened by 0.26% against other leading currencies. Gains were muted as the initial part of the week saw a period of weakness over dovish comments from Fed Chair Powell in the most recent FOMC meeting. However, the mood started picking up later in the week when Fed Vice Chair Richard Clarida suggested that strong employment numbers over the next couple of months could drive the Fed to advance tightening of its monetary policy.
Clarida’s comments reignited traders’ hopes that the Fed could advance its plans for a rate hike as well as for tapering asset purchases, making it one of the first among leading central banks to overturn its dovish outlook. This drove weakness in other major rivals, especially the Euro and safe haven Japanese yen.
Analysts are widely expecting a strong employment report, and a higher than forecast number could drive more strength in the US dollar later today. A Reuters poll expects the number of jobs added in the US during July to rise to 870k but some are even more optimistic for a reading above 1 million.
However, a weaker than expected NFP report can drive bearish moves in the US dollar, heightening expectations for the Fed to remain dovish for longer, as Powell has repeatedly cautioned.