It has been a positive week for the US dollar on the back of positive data and rhetoric. Growth figures showed a stronger-than-expected recovery for the second quarter. The US dollar remained near 9 month highs against numerous other major currencies on Thursday, following on from data that showed the U.S employment cost index rose at the fastest rate since September 2008 in the second quarter. Looking to today, investors are awaiting the key US nonfarm payrolls report for July, after it was suggested on Wednesday that slack still remains in the labour market, despite recent improvements.
The key for the US dollar revolves around the timing of when interest rates are going to be increased and the rhetoric following the Federal Reserve meeting on Wednesday was supportive of an increase in the not too distant future. That is unlikely to mean anytime in the next six months but is supportive of the strengthening trend we currently see for the US dollar against most major currencies and therefore shouldn’t expect a reversal of this trend any time soon.