Forex Today: US Dollar regains traction following Friday's pullback

Eren Sengezer FXStreet

Here is what you need to know on Monday, August 7:

The US Dollar gathers strength against its major rivals to begin the new week. After closing in negative territory in response to the US July jobs report, the US Dollar Index edges higher toward 102.50 in the European morning. Sentix Investor Confidence Index for August will be featured in the European economic docket and June Consumer Credit Change will be the only noteworthy data releases from the US later in the day.

Nonfarm Payrolls in the US rose 187,000 in July, compared to the market expectation of 200,000, the US Bureau of Labor Statistics reported on Friday. With the immediate reaction, the USD came under modest bearish pressure. Some hawkish comments from Fed officials, however, seem to have helped the USD regain its poise. Fed Governor Michelle Bowman argued that the Fed should remain willing to raise the policy rate if data show that progress on inflation has stalled. Atlanta Fed President Raphael Bostic argued that the Fed should keep monetary policy in a restrictive territory well into 2024. According to the CME Group FedWatch Tool, markets are still pricing in a nearly 30% probability of one more 25 basis points Fed rate hike before the end of the year.

EUR/USD closed the previous week virtually unchanged following Friday's rebound. Early Monday, however, the pair stays on the back foot and trades in the red below 1.1000.

GBP/USD registered small losses last week and started to stretch lower toward 1.2700 to start the new week.

Following a two-day decline that saw the pair lose nearly 150 pips, USD/JPY regained its traction early Monday and recovered above 142.00. The Bank of Japan's Summary of Opinions for July meeting showed that one member said that the bank should conduct Yield Curve Control (YCC) with greater flexibility and thereby make preparations, so that it can successfully continue with monetary easing while nimbly responding to both upside and downside risks.

As the benchmark 10-year US Treasury bond yield retreated following the July labor market data from the US, Gold price closed the last trading day of the week in the red. With the 10-year yield holding comfortably above 4% early Monday, XAU/USD finds it difficult to build on Friday's gains and trades below $1,940.

Bitcoin spent the weekend in a relatively tight channel and was last seen moving sideways at around $29,000. Ethereum struggles to find direction and moves up and down in a narrow band slightly above $1,800.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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