By Peter Nurse
Investing.com -- The dollar steadied in early European trading Monday, remaining near recent highs following Friday’s strong nonfarm payrolls release as traders priced in an early tightening of monetary policy by the U.S. Federal Reserve.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded less than 0.1% lower at 92.793, just off the two-week high of 92.927 seen earlier in the session.
USD/JPY edged lower to 110.22, EUR/USD was largely flat at 0.1% higher at 1.1761, after earlier hitting a four-month low, GBP/USD edged lower to 1.3866, while the risk-sensitive AUD/USD was flat at 0.7352.
Boosting the dollar was Friday’s strong U.S. jobs report, with nonfarm payrolls rising by a healthy 943,000 in July, while numbers for May and June were also revised up.
The Federal Reserve has made a recovery in the labor market a key requisite before it will start tightening monetary policy, but this strong release has increased expectations that a reduction in asset purchases could start this year and higher interest rates could follow as soon as 2022.
Last week, Fed Vice Chair Richard Clarida suggested that conditions for hiking interest rates might be met as soon as late 2022, while Fed Governor Christopher Waller stated that two payrolls reports showing jobs growth of 800,000-1,000,000 region in August and September would lead him to vote for tapering in September.
“The 943K jobs created this month and a positive revision to last month’s number was as ‘wished for’ by the FOMC, which means that a September taper decision is 100% LIVE!,” said analysts at Nordea, in a note.
The coming week sees the release of the U.S. consumer price index and the producer price index, on Wednesday and Thursday respectively, while Atlanta Fed President Raphael Bostic and Richmond Fed head Thomas Barkin are set to speak later Monday.
Both Bostic and Barkin are known to lean towards tapering so their comments will be closely watched.