The dollar is weakening today. The appetite for risk returned to the market after Friday’s statistics on the development of the US labor market in July. Investors are waiting for Wednesday’s report on inflation in the US, which should give an indication of how the US Central Bank (Fed) will proceed in raising interest rates.

The dollar index, which expresses the value of the dollar against a basket of six major world currencies, showed a decrease of 0.4 percent to 106.16 points around 17:30 CEST. The euro was up 0.4 percent against the dollar at the same time, hovering around 1.0219 EUR/USD. The dollar was down 0.3 percent against the Japanese yen at 134.63 USD/JPY, while the euro was up 0.1 percent against the Japanese yen at around 137.58 EUR/JPY.

The U.S. unemployment rate fell a tenth of a point to 3.5 percent in July, returning to pre-Covid-19 levels. The economy added about 528,000 new jobs, more than in June and more than double analysts’ expectations.

The latest U.S. labor market statistics are the strongest evidence yet that the U.S. economy did not fall into recession in the last quarter, as expected due to a drop in gross domestic product (GDP). The optimistic mood has carried over to today, and global stock markets are strengthening.

Analysts believe that the US central bank (Fed) will respond to this statistic by further increasing the base interest rate. Traders see a 69 percent chance the Fed will raise rates by 0.75 percentage point at its September meeting, according to Refinitiv data.

Markets are anxiously awaiting US inflation data for July due out on Wednesday. Analysts polled by Reuters estimated that year-on-year inflation eased to 8.7 percent in July from 9.1 percent in June.