DXY: Immediate Prospects
As of this writing, DXY dollar index futures are traded near 106.40 mark, just below Friday's close when the US Department of Labor's July monthly report was released. According to this report, unemployment fell to a new pre-pandemic level 3.5%, and the number of non-farm payrolls in the US economy grew by 528,000 (against the forecast of an increase of 250,000 and the previous revised value +398,000 from +372,000). Average hourly wages also rose above expectations of +0.3% growth to +0.5%.
The published data show that the labor market continues to be a strong point of the American economy.
On strong data from the labor market, the DXY dollar index again exceeded 106.00, reaching a local intra-week high of 106.81. The published data significantly improved the assessment of the state of the US economy after the publication of a disappointing 2Q GDP report a week earlier. On the increased optimism of investors, the DXY dollar index again broke upwards 106.00, rising from last week's low of 104.93.
Strong data from the US labor market reinforced expectations of further interest rate hikes this year by the Fed. And yet, market participants will carefully analyze the macro data coming from the US in order to better understand the direction of the dollar's further dynamics.
Probably, a new driver and benchmark for market participants will be the publication on Wednesday (at 12:30 GMT) of fresh data on consumer inflation in the US for July.
As expected, the Consumer Price Index (CPI), which determines the change in prices of a selected basket of goods and services over a given period and is a key indicator for assessing inflation and changing consumer preferences, will come out with a value of +0.2% and +8, 7% (in annual terms).
Theoretically, the data better than the forecast should strengthen the dollar, because they will indicate the need for further action on the part of the Fed to curb high inflation. However, it is impossible to call the current situation in the American and most of the world economies normal. Moreover, the continuing growth of inflation in the US speaks of the low efficiency of the actions taken by the FRS so far. Therefore, the reaction of the market to this publication can be completely unpredictable.