US Dollar Still Under Pressure – All Eyes on NFP Data
Aiswarya Gopan • 2 min read
Early on Tuesday, the US dollar’s weakness continues as the dovish mood of Fed Chair Powell weighs on investors’ mood, keeping it close to the lowest levels seen in a fortnight against its major rivals. At the time of writing, the US dollar index DXY is trading at around 92.49.
The bearish moves came after Powell’s speech at the Jackson Hole symposium failed to specify a timeline for when the asset purchase program could start winding down, although he did mention the central bank would start the process within this year. In addition, he also played down any scope of a rate hike anytime soon, maintaining that the US labor market was still not strong enough to consider withdrawing monetary support to the economy.
The US dollar is also trading weak as investors hesitate to enter new positions ahead of the release of the non-farm payrolls report at the end of this week. After Powell’s latest speech, the jobs data will be in greater focus as markets try to assess the health of the labor market in a bid to determine when the Fed could begin withdrawing stimulus initiatives.
As a result, month-end flows from businesses conducting import and export transactions could be the main driver of market sentiment through the day. With no other key economic data scheduled for the day, geopolitical tensions in Afghanistan and news related to COVID-19 could also remain in the spotlight, possibly lending some support to the safe haven appeal of the greenback.
Meanwhile, strengthening oil prices on the back of Hurricane Ida disrupting oil production in the Gulf of Mexico have sent commodity currencies like the Canadian dollar and Norwegian krone higher against the USD. In addition, the weakness in the US dollar has also boosted emerging market currencies while the Chinese yuan trades close to a three-week high on the back of a strong PMI release.