Trader’s calendar on August 5: USD poised for rebound
The first few days of August proved to be highly volatile for the US dollar, and largely favorable. The market initially braced for the Federal Reserve’s decision on interest rates, but July’s Fed meeting offered no surprises – and indeed, there were none.
The only thing of note was Jerome Powell’s hint at a press conference that a reduction in the policy rate could be on the table as early as September. By market logic, this should have pushed the dollar lower. However, global politics intervened in the currency market. The escalating conflict in the Middle East has not only intensified but threatens to turn into a major confrontation.
As a result, the dollar surged back to the 104.4 mark, bolstered by increased safe-haven demand. It also posted strong gains against both the British pound and the euro, following the Bank of England’s interest rate cut and dovish comments from European Central Bank policymakers. Its bullish run might have been even more pronounced were it not for the current state of the US economy.
Recent reports indicate that manufacturing activity continues to contract, while employment has fallen to its lowest level since 2020. With the release of the monthly nonfarm payrolls data later today, the pressure on the dollar could intensify.
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