The US dollar today rallied to almost 3-week highs as market hopes for future rate cuts from the US Federal Reserve dissipated in the face of positive US jobs data. The greenback also benefitted from the uncertainty surrounding the US-China trade war that caused a significant sell-off in US equity markets and high demand for the dollar.
The Dollar Index today rallied from a low of 97.37 to a high of 97.59 before retracing some of its gains by the time of writing.
The greenback’s rally today was largely driven by shifting investor sentiment following the upbeat US non-farm payrolls data released on Friday. The positive employment figures made investors rethink the likelihood of a rate cut by the Federal Open Market Committee in the near future. Most investors now believe that the Fed is likely to adopt a wait and see attitude towards rate cuts given that the US jobs sector is quite robust. Some even believe that Fed Chair Jerome Powell might adopt a tougher monetary stance in defiance of President Donald Trump‘s demands for easier monetary policies.
The dollar’s rally was further boosted by the massive sell-off in the US equity markets, which triggered a massive outflow of funds from the markets to the safe-haven dollar. Other currencies such as the euro and the Sterling pound also fell against the greenback.
The greenback’s future performance is likely to be affected by Jerome Powell’s testimony tomorrow and the release of the FOMC minutes.
The EUR/USD currency pair was trading at 1.1208 as at 17:54 GMT having fallen from a high of 1.1217. The GBP/USD currency pair was trading at 1.2464 having dropped from a high of 1.2518.
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