The July NFP report released on Friday confirmed investor expectations that US remains on growth track. The economy has added almost a million, cementing the case for hawkish Powell rhetoric on Jackson Hole conference. US money markets are slowly getting used to the idea that the first rate hike could take place in mid-2022. The improved outlook for short-term yields attracts foreign investors to the US, which is reflected in increased investment demand for USD.

The dollar's gains will likely be difficult to break next week. There are no central bank meetings next week, but the July US inflation report is due on Wednesday. If the report beats forecast (monthly growth is expected at the level of 0.5%), the chances of early tightening of the Fed's policy will increase further. Considering the rather strong Payrolls and other US data points for July (for example, the sub-index of prices in the ISM index in the non-manufacturing sector), we should expect consumer inflation to remain high July or even accelerate further. Therefore, the risks for the US dollar are skewed towards further rally. A reasonable scenario would be a test of 93.0 level in DXY and 1.1750 in EURUSD.

On Thursday, it is worth paying attention to the data on the UK GDP. The data better than estimates will likely result in further upside in Pound, as the Bank of England hinted this week that good data could warrant faster rate hikes. Therefore, increased attention of investors to economic data is justified.

The data on inflation in Germany, which will be released on Tuesday, should be able to stir a response from the euro only in case of a strong positive surprise. Then there will be chances for the hawkish rhetoric of the ECB.