DXY: US Dollar Posts Biggest Weekly Jump in Two Years, Riding on Strong Job Growth
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Key points:
- US dollar jumps 2.1% in a week.
- King of forex sees rivals bow down.
- At play: rate cuts, jobs data, war tensions.
King Dollar did it again — posting eye-watering gains and crushing rivals, this time on the back of favorable jobs data.
- The US dollar
DXY marched higher every day of the past trading week, marking a 2.1% increase — it was the best weekly performance for the greenback since mid-September 2022. The fresh leg up, after some downtime, comes from a good place. America’s job market shattered expectations with 254,000 new jobs in September, signaling a juggernaut economy even amid higher interest rates. - Against that backdrop, the Federal Reserve can now breathe more easily and not leapfrog (like the last time) the less fancy 25bps cut to interest rates. Instead, Fed officials may pursue a slower pace of rate trims given that both their mandates — inflation and employment — are panning out nicely. Speaking of inflation, September’s consumer price index (CPI) is coming this Thursday.
- How is all that affecting the US dollar? The prospects of a slower rate cut campaign mean that interest rates will remain relatively attractive to holders of the dollar and dollar-tied assets (bonds, mostly). In this light, the American currency may retain its ability to attract new capital inflows from both locals and foreigners. At the same time, the escalating conflict in the Middle East is driving forex traders to the perceived safety of the greenback.