US dollar: outlook for August 8-14
In the first days of the past week the US dollar was still feeling the negative impact of the market’s disappointment with weak American Q2 GDP growth. ISM manufacturing and services PMIs also declined, though the sectors kept growing, just at a slower pace. American labor market data released on Friday brightened the picture. US nonfarm payrolls showed solid gain in jobs in July. NFP came at 255K beating the forecast of 180K. June reading was revised up to 292K. The unemployment rate didn’t decline, but growth of average hourly earnings accelerated to 0.3%.
As the Bank of England eased monetary policy in the past week, it reminded investors about monetary policy divergence between the Federal Reserve and other central banks. The difference is that the Fed is at least looking for opportunity to tighten policy and this should support the greenback.
The market currently sees 9% chance of US rate hike in September. Positive data inflow from the world’s largest economy may increase these expectations and, consequently, demand for the greenback. Next week the most important day in the US economic calendar will be Friday: America will release retails sales, producer prices and preliminary consumer sentiment.
US dollar index managed to return above 96.00 after testing levels below 95.00. Resistance is at 97.60 and 98.00.