The U.S. dollar hovered near its highest level in seven weeks on Monday, following a surge driven by strong U.S. employment data and increasing tensions in the Middle East. The dollar’s recent gains stemmed from a U.S. jobs report that revealed the largest increase in job numbers in six months for September, coupled with a drop in the unemployment rate and notable wage growth. These indicators highlighted the robustness of the U.S. economy, prompting markets to reassess and scale back expectations for Federal Reserve rate cuts in the near future.
Analysts observed that several of the factors pressuring the dollar earlier in the summer had reversed course. Concerns about an impending recession have eased, and the current market activity suggests that a dovish stance on future interest rates may have reached its limits with the recent economic data. Forex strategist Francesco Pesole from ING remarked that there is little momentum for building short positions on the dollar in the coming weeks, as market sentiment has shifted away from anticipating further rate cuts, even as inflation data remains relatively stable.
The dollar index, which measures the U.S. currency against a basket of major counterparts, edged up by 0.05% to 102.60, after climbing to a seven-week peak of 102.69 on Friday, marking a gain of over 2% for the week—its largest increase in two years. Earlier last week, the index had hovered just above the 100 level.
Factors in the broader global landscape also impact the dollar’s trajectory. Meanwhile, heightened tensions in the Middle East, with Israel’s recent strikes on Hezbollah targets in Lebanon and the Gaza Strip, further fuel geopolitical uncertainty, which could influence market dynamics.
- Tags: Dollar, Middle east tension, The U.S, U.S jobs data
