14.09.202111:59 Forex Analysis & Reviews: Harvest time: USD reaps benefits of its yields

It is time for the US currency to reap the benefits of its yields. The greenback has survived despite recent negative US labor market statistics and the Fed's tricky monetary strategy.

According to experts, in the near future the US dollar will continue to follow its previous strategy and will try to hit new highs. On the first day of the week, the greenback took the bull by the horns. On Monday, September 13, it hit a two-week high against major currencies. The market expectations concerning the Fed's fastest stimulus tapering became the driver of such growth.

A flurry of the US macrostatistics, due out this week, may give support to the greenback. On Wednesday, September 15, the US inflation data are expected. According to preliminary estimates, consumer prices in the United States expanded 5.3% on year in August. Other macroeconomic reports will be released on Thursday, September 16. They include the US industrial production and retail sales data. The former reading is expected to rise by 0.4% and the latter to fall by 0.8%.

The current situation has a mixed impact on the USD dynamics. It is difficult to choose the direction of its vector. On Monday, September 13, the European currency plunged against the American currency. Later, it slightly recovered. The euro went up to 1.1813 from the previous 1.1808 against the dollar. The EUR/USD pair traded at 1.1815 on Tuesday morning, September 14, showing a slight rise in the euro and giving it a chance to recover.

Currency strategists attach great importance to a speedy ending of stimulus programs. The quantitative easing program tapering (QE) will benefit the greenback, becoming the first step to a monetary policy tightening (MP). Currency analysts at MUFG note that the recent consolidation of the American currency coincided with implicit hawkish comments of the Fed representatives. Moreover, many market participants back the further monetary support of the US economy.

Disappointing reports on the US employment determine this view. However, the Fed representatives' recent statements demonstrate their obvious hawkish mood. It reflects the current financial policy of the US monetary authorities.

Now the dollar got a significant financial boost. The opposite situation is with the euro. Therefore, the greenback might score a short-term victory, while the single currency will have to await the triumph. The dollar gained more yields than its European rival. At the moment, the fortune favors the greenback, but the euro is not losing hope to yield.