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In the Asian session on Monday, the US dollar index hit a new high of 109.44 which was last seen in October 2002. Last week, DXY had already tested the 109.00 mark, but then it pulled back on disappointing macroeconomic data from the US. Today, the US dollar index opened the week with a jump to a new 20-year high. USD developed the bullish momentum last Friday, right after Fed Chairman Jerome Powell commenced speaking at the Jackson Hole economic symposium. He confirmed that the Fed is determined to fight inflation and sees it as the main goal.
"We will keep at it until we are confident the job is done," Powell said at the opening of the Jackson Hole forum. This means that the focus is on bringing inflation back to the 2% target. So, the US dollar bulls got support from Jerome Powell's words who warned that "Restoring price stability will take some time and requires using our tools forcefully."Apparently, the Fed will stick to its ultra-tight monetary policy and may maintain the same rate of monetary tightening. Thus, the US dollar will continue to strengthen.
This week, the US will publish some important macroeconomic data. The main focus will be on the US jobs report for August expected on Friday at 12:30 GMT. This publication is extremely important for market participants. The data showing the state of the labor market, along with the GDP report and inflation, is the gauge that helps the Fed determine its future monetary policy.
According to the forecast, the US economy added 285,000 new jobs in August, wages continued to rise, and unemployment remained at 3.5%, unchanged from the previous month. This is the lowest unemployment rate seen in the past few years which correlates with pre-pandemic levels.
In general, the estimates are encouraging. The data shows continued improvement in the US labor market. Notably, it remained strong before the pandemic, thus indicating the stability of the US economy.
Investors will also pay attention to the publication on Thursday at 12:30 GMT. The report will reveal the latest weekly data on initial jobless claims.Initial and continuing jobless claims are expected to remain at pre-pandemic lows. This is also a positive factor for the US dollar since it indicates the stability of the US labor market.
Previous (weekly) reading for initial jobless claims: 250K, 252K, 248K, 254K, 261K, 244K, 235K, 231K, 232K , 202K, 211K.
Previous (Weekly) reading for continuing jobless claims:1,437K, 1,430K, 1,420K, 1,368K, 1,384K, 1,333K, 1,372K, 1,324K, 1,331K, 1,309K, 1,309K
As for the dollar's main rival, the euro was appreciating early in the European session both in cross pairs and against USD. At the time of writing, the EUR/USD pair was trading near the 0.9980 level, up from today's low of 0.9915. Will the pair return above the parity level of 1.0000? This is possible but further growth is highly unlikely.
By and large, EUR/USD remains bearish. The downtrend is supported by both the strengthening of the greenback and the weakness of the euro as the ECB is struggling to tackle inflation in the eurozone.
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