Dollar Stands Firm as Strong US Data Supports Hawkish Fed

The US dollar has strengthened at the beginning of August as robust economic data in the United States reinforces expectations that the Federal Reserve will maintain its tight monetary policy for a longer period. The strong ISM manufacturing survey for July surprised to the upside, showing activity expanding at its fastest pace in over four years.

Strong demand and increased production levels, along with continued hiring by firms, further support the view that the US economy remains resilient despite high interest rates. Inflation pressures remain uncomfortable due to tariffs and higher energy costs linked to Middle East tensions. Brent oil has climbed back towards $85 a barrel as US-Iran negotiations remain fraught, keeping inflation risks and Treasury yields elevated.

Attention now turns to the labour market, with key data releases including JOLTS, ADP, and Friday's payrolls report, which will determine whether recent hawkish Fed pricing can be sustained. Unless employment data shows a clear deterioration in labour market conditions, expectations for a September rate hike are likely to remain intact.