10 June 2019 : The US Dollar is attempting to shake off the hangover from last Friday’s painful selloff with prices trading around 96.7 level at the time of writing.

Despite shedding over one percent so far this month, the current levels in the DXY will be attractive to potential Dollar buyers. The Dollar has managed to show its resilience to periods of weakness several times over the past 12 months, and investors will be closely monitoring whether it will be able to take this latest setback from the employment report in its stride.

What is more concerning for the DXY moving forward is that several US economic indicators in the second quarter have suggested that US economic growth momentum is cooling, raising speculation that the Federal Reserve will need to cut interest rates over the coming months.  

The US central bank may well intervene on its monetary policy settings to sustain growth in the world’s largest economy, which is on the cusp of reaching its longest-ever expansion come July.

Even though ramped-up market bets for a Fed rate cut this year have created a somewhat Dollar-negative environment, those hoping for the DXY to capitulate may be left disappointed, given the relatively weak pushback from other G10 currencies. Economic woes continue to cloud the Euro’s outlook, while the Pound remains mired in the Brexit fog, implying that these fluctuations in the Dollar Index could only provide little upside to other global currencies

There will be a special focus on US inflation and retail sales figures this week following the dismal US jobs report for May. Should these two reports disappoint, market speculation is likely to heighten over the Fed cutting interest rates this year. Such a development will be negative for the Dollar but warmly welcomed by emerging market currencies.

Reporting for EasyKobo on Monday , 10 June 2019 in Lagos, Nigeria

Source: Lukman Otunuga, FXTM Research Analyst