Original article by Mitrade News Team. The content below is a rewritten and expanded version for educational and informational purposes.
Title: US Dollar Strengthens Ahead of Key Economic Data as Market Eyes Fed’s Next Move
As the new trading week commenced on September 2, 2025, the forex market spotlight was firmly placed on the US dollar. Investors and traders closely analyzed a range of economic indicators and global monetary policy cues, particularly from the United States. A series of data points due this week will play a pivotal role in shaping expectations surrounding the Federal Reserve’s next monetary policy shift. As a result, forex volatility has noticeably increased.
Summary of Key Market Movements and Developments:
– The USD continued to show strength amid expectations that the Federal Reserve may maintain a hawkish stance.
– A rebound in the DXY (US Dollar Index) reflected growing investor confidence in the USD.
– EUR/USD and GBP/USD weakened due to stronger dollar sentiment and local economic uncertainty.
– Asian currencies, including the Japanese yen and Chinese yuan, struggled under the impact of diverging monetary policies.
– Commodities such as gold and oil experienced pressure from the stronger USD.
Let’s explore the reasons behind these shifts in detail, along with how upcoming data releases are expected to impact forex markets across the globe.
US Dollar Maintains Upward Momentum
So far this week, the US dollar has extended its bullish trend against a basket of major currencies. The DXY index, which measures the American currency against six others including the euro, pound, and yen, rose above the 105.00 mark for the first time in two months.
This rise in the dollar has been underpinned by two primary factors:
1. Expectations of Prolonged High Interest Rates:
– Despite signs of softening inflation, various Federal Reserve officials have made statements supporting a cautious approach to rate cuts.
– Markets had initially priced in at least one interest rate cut in 2025, but current futures data now suggests a possible postponement into Q2 or Q3.
– The Fed’s preferred inflation gauge, personal consumption expenditures (PCE), came out last week showing steady pricing pressure — strengthening the argument for sustained higher rates.
2. Robust US Economic Data:
– Recent US GDP data beat expectations, growing at an annualized rate of 3.0% in Q2 2025.
– The labor market remains historically tight, with unemployment unchanged at 3.6% and continued strong non-farm payroll (NFP) figures.
– Consumer spending also remains resilient, further supporting the Fed’s stance to observe rather than react with cuts.
These developments fuel market conviction that the Fed will maintain higher interest rates longer than previously expected, providing strong support for the US dollar in the near term.
Upcoming Data that Could Trigger Volatility:
Several important data releases this week have the potential to drive forex volatility. These include:
– Non-Farm Payrolls (NFP) Report:
– Due on Friday, this will be one of the most critical data points for markets.
– Analysts expect payrolls to increase by 170,000, with average earnings likely to rise 0.3% month-over-month.
– A strong NFP print would bolster the Fed’s hawkish rationale and could lift the USD further.
– ISM Manufacturing and Services PMI (Tuesday and Thursday):
– These indicators provide insight into the economic health of US businesses.
– The services sector, which makes up over 70% of the US GDP, is expected to show moderate growth, sustaining overall economic momentum.
– Initial Jobless Claims Data:
– This weekly metric will offer interim insights ahead of NFP.
– Recent data has seen claims stabilize near multi-decade lows, reflecting underlying labor market strength.
Euro and Pound Slide Under Pressure
The euro (EUR) began the week on the back foot, as persistent concerns over eurozone economic stagnation eroded investor confidence. The EUR
Read more on EUR/USD trading.