US Dollar Index holds above the 104.00 mark, eyes on US Services PMI data

• The US Dollar Index (DXY) trades on a stronger note around 104.02 on Monday. 
• The Fed chair reiterated that the next meeting in March was too early for a rate cut. 
• The US Nonfarm Payrolls (NFP) for January rose to 353K from 333K in December, stronger than expected. 

The US Dollar Index (DXY), a measure of the value of the US Dollar (USD) against a weighted basket of currencies used by US trade partners, gains momentum above the 104.00 psychological mark during the early European trading hours on Monday. The upbeat US job data and the expectation that the US Federal Reserve (Fed) might keep interest rates higher for longer than previously anticipated boost the Greenback broadly. The DXY currently trades near 104.02, adding 0.11% on the day.

Fed Chair Jerome Powell said on Sunday night that the central bank remains on track to cut interest rates three times this year. However, Powell reiterated that the Fed’s next meeting in March was likely too soon for a rate cut. Most economists think the first cut is likely to come in May or June.

Data released by the US Bureau of Labor Statistics (BLS) showed that the US Nonfarm Payrolls (NFP) for January rose to 353K from 333K in December (revised up from 216K). Additionally,  the Unemployment Rate was unchanged at 3.7% in January. The Average Hourly Earnings climbed 4.5% YoY in January from 4.4% in the previous reading. After the report, the probability of a March rate cut has dropped to 19%, compared to 38% just a day ago, according to the CME FedWatch tool.

Furthermore, the US national security adviser, Jake Sullivan, said the US would take additional strikes and additional action in response to the Jordan drone attack that killed three soldiers last weekend. The rising tension in the Middle East could boost safe-haven flows and benefit the USD.

Moving on, market participants will monitor the January US ISM Services PMI, which is estimated to improve to 52.0 from 50.6 in December. Fed's Raphael W. Bostic is set to speak later on Monday. Traders will take cues from the data and find trading opportunities around the US Dollar Index.