- The US dollar index loses land at 96.70 in the first Asian session on Thursday.
- The private payrolls of the United States in June registered the first fall in more than two years.
- The operators will be attentive to the US NFP report of June later on Thursday.
The American dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world currencies, is kept on the defensive about 96.70 during the first Asian session on Thursday. All eyes will be placed in the publication of the highly agricultural payroll data (NFP) of the US for June, which will be published later on Thursday.
The US dollar retreces after the National Employment Report of ADP showed that US private payroll fell for the first time in more than two years in June. The US private sector payrolls decreased by 33,000 in June after a decreased downward increase in 29,000 in May. This figure was below the market consensus of 95,000.
This negative report has backed the market expectations of an interest rate cut by the Federal Reserve (Fed), weighing on the USD. In addition, moderate comments from Fed officials contribute to the fall of the USD. The president of the Fed, Jerome Powell, said Tuesday that he would not rule out a possible rate cut at this month’s meeting, adding that everything depends on the data that arrives.
Operators prepare for US employment data on Thursday in search of a new impulse, since they could offer some clues about the time of interest rates reductions on the part of the Fed. Economists expect the US NFP to increase in 110,000 in June.
In addition, the unemployment rate is expected to rise to 4.3% in June, while it is estimated that the average hourly profits are stable at 3.9% year -on -year in the same period as the report. Any surprise up to US employment data could help limit USD losses
US Dollar – Frequently Questions
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
