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The US dollar index regained its smile and retested the 102.30 area.
Fed Bowman advocates further tightening policy if necessary.
US inflation data will be the key event of the week.
The U.S. dollar index , which measures the greenback against a basket of major currencies, shrugged off some of its recent weakness to return to around 102.30 as risk aversion appeared to have the upper hand early Monday.
Dollar index resumes gains on Fed, risk aversion
At the beginning of the week, the dollar index rose all the way on renewed buying interest in the greenback.
Indeed, the greenback regained momentum after comments from FOMC Bowman over the weekend in which he defended further tightening in case recent inflationary progress faltered. Bowman did not rule out another rate hike at the next meeting.
Meanwhile, investors continued to digest Friday’s non-farm payrolls (+187K), which showed that job creation appeared to cool last month even as wage inflation held steady and the unemployment rate fell.
In the US data arena, changes in consumer credit will be the only data to watch later in the North American session, along with short-term bill auctions.
The U.S. dollar index was back above the 102.00 area on Monday, as market participants continued to assess the July non-farm payrolls data and remained cautious ahead of key U.S. inflation data due on August 10.
So far, the apparent rally in the US dollar index appears to be finding tough initial resistance around 102.80, with the Fed’s data-dependent stance likely to face additional headwinds against the current backdrop of persistent deflation and a cooling labor market.
In addition, speculation that the rate hike in July may be the last of the current rate hike cycle is also expected to keep the dollar under some temporary pressure.
U.S. key events of the week; Consumer Credit Change (Monday) – Trade Balance, Wholesale Inventories (Tuesday) – MBA Mortgage Applications (Wednesday) – Inflation, Initial Jobless Claims (Thursday) – Producers Prices, Flash Michigan Consumer Confidence Index (Friday).
Main topic: Ongoing debate over a soft or hard landing for the U.S. economy. Near-peak terminal rates and speculation of a rate cut in late 2023 or early 2024. Geopolitical conflict with Russia and China. US-China trade conflict.
Currently, the US Dollar Index is trading at 102.25, up 0.24%, with a break above 102.84 (3rd Aug high) opening the door to 103.52 (200-day SMA) and eventually 103.57 (30th June high). On the other hand, immediate support is at 101.74 (4th Aug low), then 100.55 (27th Jul low) and then 100.00 (psychological level).
