According to the Bloomberg Dollar Index, the US Dollar is hovering at its highest level in 3 months against its major peers at the time of writing, supported by better-than-expected February NFP figures and improving growth outlook. The US job report showed that 379,000 jobs were created in February, which is more than the 182,000 expected by economists polled by Reuters. The unemployment rate even slightly improved, falling to 6.2% in February from 6.3% in January, even though we remain a long way off from pre-Covid levels.
This report shows some improvements in the American job market, supporting the view of US policy markets - including the chair of the Federal Reserve, Jerome Powell - that the economy outlook in the US is improving. Thanks to stronger vaccination efforts around the world, the US economy could reopen and see a brighter post-pandemic horizon - not to mention Covid-19 stimulus and relief measures from the treasury department that are supposed to boost economic activity.
“While the US jobs report was better than expected, it also reminds us that there is still a long runway for the economic recovery to take-off in the coming quarters. While 12.9M of the 22.4M jobs lost from the pandemic have been recovered, that still leaves employment 6% below its pre-pandemic peak,” declared Ambrose Crofton - Global Market Strategist at JP Morgan Asset Management.
Many investors are now wondering what to expect from the greenback in these uncertain times and how they can take advantage of its potential price movement, given that the USD is still expected to remain volatile - that’s why many retail traders are now entering the Forex market through popular online brokers.
With easyMarkets for instance, you can trade the USD with fixed spreads regardless of market conditions, which will allow you to better manage your trading costs by knowing them in advance. In addition, the broker offers different money and risk management tools, like free guaranteed stop-loss, as well as negative balance protection. Another popular tool is dealCancellation, which allows you to undo a losing trade within 1, 3 or 6 hours for a small fee, subject to terms and conditions.
Trading the USD might bring some great bullish or bearish trading opportunities, as the US economy could still face substantial headwinds in its way towards pre-Covid growth levels. The way fiscal packages might affect the American economy is subject to a great deal of uncertainty - and this could influence monetary policy, in turn impacting the value of the US Dollar.
Jerome Powell recently confirmed that easy-money policies will probably keep going, but that the Fed keeps an eye on market conditions and financial conditions to determine whether or not they can threaten the achievement of the Fed’s “dual mandate” of maximum employment and stable prices.
American long-term bond rates are currently rising, increasing the demand for the US Dollar, and supporting its price. But is this rise a sign of a brighter future ahead or a sign of a potential inflation-led economic disaster? Are bond yields rising because of inflation rate expectations or because of investor capital being transferred from risky assets to less risky markets? This will give hints of the USD future direction.