The US dollar shows resilience hoping for more gains. The dollar Index is seen as showing signs of modest recovery gains after a period of weakness. Despite the recent dips, the US Dollar has managed to remain relatively steady in the market. The USD’s ability to hold its footing in the market can be largely attributed to the US labor market, which showed signs of a cooldown in June.
The latest monthly jobs report released by the US Bureau of Labor Statistics revealed that nonfarm payrolls (NFP) fell short of market expectations. Additionally, the report also indicated that the unemployment rate edged lower to 3.60% while annual wage inflation held steady.
Despite the slight dip in performance, the US Dollar Index remains relatively strong, hovering around the 102.50 mark.
The currency market is highly attuned to statements made by officials from the Federal Reserve (Feds), as these play a key role in dictating monetary policy.
With the release of the June inflation data imminent, the value of the USD is expected to be significantly impacted. Despite a mixed employment report, the market continues to anticipate a 25 basis point increase in the policy rate in July. This is largely due to the higher yields offered by the USD when compared to other major currencies.
US Dollar Could Appreciate Further
The US Dollar (USD) is on course to experience an appreciation soon, according to analysts at Morgan Stanley. This is largely attributed to the higher yields that the currency offers, as investors are drawn to currencies with higher returns.
The Federal Reserve’s cycle of rate hikes has positioned the USD in a favorable position; however, it is estimated that the likelihood of further rate hikes beyond July is only around 30%. This suggests that the USD may experience some appreciation in the short term, but the pace of rate hikes may slow down in the long run.
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