Forex Today: NFP-inspired dollar rally pauses at the start of the week

Here is what you need to know on Monday, August 8: Boosted by the upbeat July jobs report, the US Dollar Index (DXY) gained 0.8% on Friday and ended u  |  08/08/2022 08:02

Here is what you need to know on Monday, August 8:

Boosted by the upbeat July jobs report, the US Dollar Index (DXY) gained 0.8% on Friday and ended up snapping a two-week losing streak. Markets stay relatively quiet early Monday and the DXY consolidates Friday's gains. The European economic docket will feature the Sentix Investor Confidence Index data for August. There won't be any high-impact data releases from the US and the risk perception could drive the market action in the second half of the day. The US stock index futures are up modestly in the European morning, pointing to a neutral market mood.

The Bureau of Labor Statistics reported on Friday that Nonfarm Payrolls rose by 528,000 in July, surpassing the market expectation of 250,000 by a wide margin. According to the CME Group FedWatch Tool, the probability of a 75 basis points Fed rate hike in September now stands at 68.5%, compared to 29% a week ago. With hawkish Fed bets dominating the markets, the benchmark 10-year US Treasury bond yield climbed above 2.8%. In an appearance before the Kansas Bankers Association over the weekend, Fed Governor Michelle Bowman said that she strongly supports super-sized rate increases to fight inflation.

NFP Analysis: America's labor market is red hot, only weak inflation could dethrone King Dollar.

Meanwhile, China is reportedly continuing the military drills in the seas and skies around Taiwan on Monday. Ahead of the weekend, China’s Foreign Ministry announced that they will sanction US House of Representative Speaker Nancy Pelosi over her visit to Taiwan.

The data from China showed that the trade surplus widened to $101.26 billion in July from $97.94 billion in June. On a yearly basis, Exports rose by 18% in that period, surpassing analysts' estimate of 15%. 

During the Asian trading hours, the Reserve Bank of New Zealand's Inflation Expectations for the third quarter declined to 3.07% from 3.29% in the previous quarter. NZD/USD's reaction to this data was relatively muted, however, and the pair was last seen trading at 0.6240, where it was up 0.24% on a daily basis.

EUR/USD dropped below 1.0250 after the US jobs report on Friday but managed a erase a portion of its daily losses. Nevertheless, the pair continues to trade below 1.0200 at the beginning of the week.

After having snapped a two-week winning streak, GBP/USD trades in a relatively tight range below 1.2100 early Monday. 

Fueled by surging yields and the broad-based dollar strength, USD/JPY gained more than 200 pips on Friday. The pair continues to edge higher toward 135.50 in the European morning.

Gold lost its bullish momentum on Friday and suffered heavy losses. XAU/USD moves up and down in a narrow range above $1,770 on Monday.

Bitcoin gathered bullish momentum on Monday and was last seen gaining more than 2% on the day at $23.750. Ethereum trades near the upper limit of its two-week-old range near $1,700, rising 2% on the day.

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