US Dollar rally continues as focus shifts to high-tier US data

NEW YORK (August 1) Following Monday's relatively quiet action in financial markets, the US Dollar started to gather strength against its major rivals on the first trading day of August. The USD Index – which tracks the USD's valuation against a basket of six major currencies – climbed to its highest level in three weeks above 102.00 in the European session.

The US economic docket will feature June JOLTS Job Openings data and the ISM Manufacturing PMI for July on Tuesday, Later in the week, ADP private sector employment Nonfarm Payrolls data will be watched closely by market participants, who are yet to decide whether to price in one more Federal Reserve (Fed) rate hike this year.

Daily digest market movers: US Dollar stretches higher on Tuesday

• “Banks reported that, on balance, levels of standards are currently on the tighter end of the range for all loan categories. Compared with the July 2022 survey, banks reported tighter levels of standards in every loan category," the Fed said in the July 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS).
• Wall Street's main indexes registered small gains on Monday. US stock index futures trade in negative territory in the European session on Tuesday.
• The data from China showed that the business activity in the manufacturing sector contracted in July, with the Caixin Manufacturing PMI declining to 49.2 from 50.5 in July.
• The ISM reported on Monday that the Chicago PMI improved to 42.8 in July from 41.5 in June. 
• The Federal Reserve Bank of Dallas' Texas Manufacturing Survey revealed that the headline Manufacturing Business Index edged higher to -20 in July from -23.2 in June.
• Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, fell to 3% on a yearly basis in June from 3.8% in May, the US Bureau of Economic Analysis reported on Friday. This reading came in below the market expectation of 3.1%.
• Core PCE Price Index, the Federal Reserve's preferred gauge of inflation, arrived at 4.1% on a yearly basis, down from 4.6% in May and below the market forecast of 4.2%. Further details of the publication revealed that Personal Income and Personal Spending increased 0.3% and 0.5% on a monthly basis, respectively.
• The real Gross Domestic Product (GDP) of the US expanded at an annualized rate of 2.4% in the second quarter, the US Bureau of Economic Analysis' (BEA) first estimate showed on Thursday. This reading followed the 2% growth recorded in the first quarter and surpassed the market expectation of 1.8% by a wide margin.
• According to the CME Group FedWatch Tool, markets are pricing in a 20% probability of a 25-basis-point Federal Reserve (Fed) rate hike in September.
• The benchmark 10-year US Treasury bond yield was last seen rising more than 1% on the day above 4%.
• In an interview with CBS over the weekend, Minneapolis Federal Reserve Bank President Neel Kashkari said that he was not sure whether the Fed was done raising rates. Commenting on the jobs markets, Kashkari noted that it would not surprise him to see the unemployment rate tick up slightly.
• The Fed raised its policy rate by 25 basis points (bps) to the range of 5.25%-5.5% following the July policy meeting as expected. In the post-meeting press conference, Fed Chairman Jerome Powell refrained from confirming another rate hike this year and said that every policy meeting will be live. "If we see inflation coming down credibly, we can move down to a neutral level and then below neutral at some point," Powell told reporters, noting that the policy was already restrictive. 

FXStreet