Weekly Fundamental US Dollar Forecast: Will Inflation Propel US Dollar After The Strong July NFP?

Eurodollar Futures Contract Spread (August 2021 - December 2023): Daily Rate Chart (February to August 2021) (Chart 3)

Weekly Fundamental US Dollar Forecast: Will Inflation Propel US Dollar after the Strong July NFP?

At their July high following the June US nonfarm payrolls report, there were 107 bps worth of rate hikes discounted by December 2023; at their low this week, there were just 69 bps discounted. Following the July US nonfarm payrolls report, there are now 87 bps priced in.

In other words, three full rate hikes are expected, and there is a 48% chance of four rate hikes by the end of 2023.

CFTC COT US Dollar Futures Positioning (August 2020 to August 2021) (Chart 4)

Weekly Fundamental US Dollar Forecast: Will Inflation Propel US Dollar after the Strong July NFP?

Finally, looking at positioning, according to the CFTC’s COT for the week ended Aug. 3, speculators increased their net-long US dollar positions to 18,880 contracts from 16,561 contracts. Net-long US dollar positioning is now at its highest level since the second week of March 2020 (the apex of coronavirus pandemic concerns in financial markets).

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For full US economic data forecasts, view the DailyFX economic calendar.

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