As you know, the dollar exchange rate has been lagging lately. We all wish wars would end as quickly as possible, but sometimes they last for years, sometimes decades. The Fed’s war on inflation is no exception. Investors are eagerly waiting for the labor market to finally start cooling down. And it isn’t thinking about it. A 528,000 gain in employment in July showed that the labor market is still hot as a stove. And if so, inflation will remain hot for a long time to come. 

Dollar rate today live – what’s going on?

A strong labor market report will dissuade investors that the Fed can only raise the federal funds rate to 3.5% and then start lowering it. In fact, even 4% now doesn’t look like a ceiling. Surely the September FOMC meeting will consider a 75bp increase in borrowing costs, which should cool the fervor of the S&P 500 bulls, inflate Treasury yields, and strengthen the U.S. dollar. 

Such asset dynamics will lead to a tightening of financial conditions. This is what the Fed is pushing for, but the central bank still has a lot of work to do. Especially considering the fact that the index has been rising lately.

“Bears” on EURUSD kept two of their key trump cards in hand: the divergence in the monetary policy of the ECB and the Fed, as well as the high demand for shelter assets amid the difficult economic and geopolitical situation in the world. Expectations for strong statistics on U.S. inflation could become a new catalyst for a major currency pair peak. 

Bloomberg experts expect a slowdown in consumer prices in July from 9.1% to 8.7% and an acceleration in core inflation from 5.9% to 6.1%. The indicators will continue to be at elevated levels, hinting that the Fed is far from having done its job yet.

Technically, on the EURUSD daily chart, the pair’s drop below fair value at 1.019 indicates that the bears’ intentions are serious. Failure to return to this level is a reason to sell the euro against the U.S. dollar in the direction of 1.007 and 1.