US Dollar Index approaches 99.00 amid escalation in the Russia-Ukraine war, US Services PMI eyed

• The DXY has observed decent buying interest towards 99.00 on the upbeat US Unemployment Rate.
• US jobless rate has reached near its pre-Covid-19 levels.
• Ukraine has accused Russia of brutal killings of civilians in Bucha, Ukraine.

The US dollar index (DXY) has witnessed a juggernaut rally after encountering February’s high at 97.73. The DXY has strengthened on the higher probability of an interest rate hike by 50 basis points (bps) from the Federal Reserve (Fed) in May’s monetary policy. The odds of a jumbo rate hike have triggered after the US Unemployment Rate landed at 3.6%.

US Unemployment Rate near pre-Covid-19 levels

The US Unemployment Rate at 3.6% is a record low since February 2020. Therefore, it would be justified to claim that the payrolls are reaching their pre-Covid-19 levels. It is worth noting that the US Bureau of Labor Statistics is reporting the jobless rate below 4% since December and consistency below the Fed’s benchmark rate of full employment is compelling for an interest rate hike. Adding to that, market participants are already familiar with galloping inflation. And, higher inflation and a strong labor market are a deadly duo for featuring an oversize interest rate.

De-escalation in the Russia-Ukraine Peace Talks

Things were forwarding fine when negotiators from Russia and Ukraine were discussing the elements printed in the special document of a ceasefire. However, Ukraine has cornered Russia on the death of civilians in Bucha, Ukraine. This will bring more sanctions on Russia from the Western leaders and a risk-off impulse in the market.

Although minutes from the Federal Open Market Committee (FOMC) will be the major trigger, investors will also focus on US Services PMI, which is due on Tuesday. A preliminary estimate at 58 indicates an outperformance from the US economy as the prior figure was 56.6

Key events this week: ISM Services PMI, ISM Services New Orders Index, ISM Services Employment Index, and Initial Jobless Claims.

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, FOMC Minutes, Reserve Bank of Australia (RBA) monetary policy.