“The greenback, as measured by the USD Index (DXY), recovers some stability after a significant decline following Friday’s post-NFP sell-off and revisits the 102.40 level at the start of the week.
USD Index Focuses on Federal Reserve Remarks and Consumer Price Index
The index gains buying interest after experiencing two consecutive days of decline on Monday as investors continue to adapt to the release of June’s Payrolls report (+209K jobs). The market’s expectations for a 25 basis points rate hike remain mostly unchanged for now.
According to CME Group’s FedWatch Tool, there is approximately a 92% probability of such a scenario unfolding, given the US economy’s ongoing resilience and the tight labor market.
During the North American session, the sole data release will be Wholesale Inventories, accompanied by speeches from several Federal Reserve representatives: M. Barr (permanent voter, centrist), San Francisco Fed M. Daly (2024 voter, hawk), Cleveland Fed L. Mester (2024 voter, hawk), and Atlanta Fed R. Bostic (2024 voter, hawk).
Key Points to Observe Regarding the USD
The index remains near the 102.40 area following Friday’s Nonfarm Payrolls report, as caution grows ahead of the release of crucial US inflation data on July 12.
Simultaneously, the likelihood of another 25 basis points rate hike at the upcoming Fed meeting in July remains high, supported by the continued strength of vital US indicators such as employment and prices.
This viewpoint gained further reinforcement from comments made by Fed Chief Powell during the June FOMC event. He referred to the July meeting as “live” and indicated that most of the Committee members are ready to resume the tightening campaign as early as next month.”
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