US Dollar Index gains momentum to near 98.50 on cautious mood
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, drifts higher near 98.40 during the early Asian trading hours on Wednesday. The US JOLTS Job Openings and the Fed Beige Book will be released later on Wednesday.
The cautious mood in the financial markets and the ongoing Russia-Ukraine conflict boost the safe-haven flows, supporting the DXY. "Negative developments outside of the U.S. are probably what's driving the market today, in terms of dollar strength," said Vassili Serebriakov, FX strategist at UBS in New York.
Nonetheless, the prospect of the US Federal Reserve (Fed) rate cut this month, along with the dovish remarks from Fed officials, might undermine the US Dollar. Money markets are currently pricing in nearly a 91% odds that the Fed will cut rates by 25 basis points (bps) in the September meeting, up from an 85% possibility last week, according to the CME FedWatch tool.
The US Nonfarm Payrolls (NFP) data for July showed a slowing US labor market, with fewer jobs added than expected. This employment report has raised the likelihood of an interest rate reduction by the US central bank in September. Traders will take more cues from the NFP report for August later on Friday. The US economy is forecast to see 75K job additions in August, while the Unemployment Rate is projected to tick higher to 4.3% during the same report period.
Meanwhile, concerns over trade uncertainty might also drag the DXY lower. The US Court of Appeals for the Federal Circuit on Friday upheld a ruling that the sweeping tariffs the US President Donald Trump unilaterally imposed on most other countries were illegal. US President Donald Trump said late Tuesday that he would ask the Supreme Court for an “expedited ruling.”
Source: FXstreet
