Ahead of the release of the much awaited NFP figures for the month of August, the US dollar is trading steady against other major currencies as markets await cues about the progress of economic recovery. At the time of writing, the US dollar index DXY is trading around 92.78.
Even though the dollar has managed to hold steady in the past few sessions, the outlook for the currency remains bearish on account of the Fed’s recent announcement regarding a shift in strategy, indicating a longer period of dovishness. The Fed is expected to keep interest rates low for more time as it focuses on improving employment and supporting the economy.
Meanwhile, doubts linger about the pace of economic recovery in the US in the wake of the coronavirus crisis, extending additional downward pressure on the greenback. Recent data releases have revealed signs of rebound slowing down in the US, after improving during May and June.
Fiscal stimulus measures from the government are tapering off even as the next round of stimulus in the form of the coronavirus relief bill fails to make much progress. A reduction in financial support is also weighing on the US labor market, slowing down the rebound, which in turn, is driving more bearish pressure in the US dollar.