US Dollar’s Strength Sends Major Currencies on Bearish Track
There appears to be no stopping the US dollar’s bull run as it climbs to multi-month highs against safe haven Japanese yen as well as other leading currencies, as traders cautiously await the non-farm payrolls report to gauge how it could impact the Fed’s decision to tighten its monetary policy. At the time of writing, the US dollar index DXY is trading around 92.39.
USD/JPY soared above the key 111 level, touching 111.65 for the first time since March 2020, before undergoing a slight dip. Meanwhile, the DXY trades just under a 10-week high that it touched during the previous session.
Economists anticipate a strong NFP report for the month of June, forecasting an addition of around 700k jobs against May’s reading of 559k and for the unemployment rate to dip to 5.7% from the previous month’s 5.8%. A positive report will increase expectations for the Fed to turn hawkish sooner than originally planned, in line with the most recent FOMC statement, despite Chairman Powell playing down such a possibility repeatedly.
The bullish moves in the US dollar have been exerting significant pressure on the Euro, with EUR/USD holding below the $1.19 mark, the lowest level seen in almost three months. The Cable has also suffered on account of this recent development, with GBP/USD collapsing under the $1.38 level and sliding towards the lowest levels seen since two months.
With the market risk sentiment under pressure owing to the spike in coronavirus cases worldwide from the delta variant, commodity currency AUD has also dipped below the key $0.75 level against the greenback. The situation remains grim with several Southeast Asian countries as well as Australia reporting fresh outbreaks and announcing lockdown curbs, while European nations Spain and Portugal have imposed entry restrictions on unvaccinated Britons ahead of the upcoming holiday season.