?Watching the dollar vis-a-vis a basket of currencies has been a pleasure for binary options traders for quite some time. The uncertainty that typically dogs other currencies like the euro, the ruble, the yen and the South African Rand to name a few has been less of a factor with the US dollar since it has been leading the charge during a global downturn.

I have always advocated – at least in recent times – call options on the US dollar prior to the release of important economic data like employment readings, nonfarm payrolls, GDP and the like.

Recent economic uncertainty in China, emerging market economies and across Europe has once again put the focus back on the world’s biggest economy. That the US economy was able to withstand the Chinese meltdown, and rebound after the inimitable Black Monday is testament not only to the structural strength of the US economy, but to the confidence that international investors have in the world’s #1 economic power. That is not to say that the US economy is impervious to global downturns – on the contrary. However, economic data supports the overall consensus that structurally the American economy is sound.

US Dollar Index 28 August 2015 (5 day forecast)

The dollar gained against the euro for 3 consecutive days as economic data confirms that US GDP rose by 3.7% during Q2 2015 (economists were expecting a 3.3% increase). And that was coupled with a 3-week low in jobless benefits filings to 271,000 – a reduction of 6,000 applications for the week ending 22 August 2015. What this does is boost investor confidence in the dollar, drive demand and simultaneously reduce demand for other currencies that are being exchanged for dollars. The bulls are charging and there will certainly be a spring in the dollar’s step come September 1.

This begs the question: What will happen about the Fed interest-rate hike?

Analysts have been tempering their expectations about the September rate hike. Initially estimates put the likelihood of a September rate hike at 50% or more, but now that figure has dropped below 30%. The fact of the matter is that the global economy has not sufficiently corrected or shown the steel that it needs to warrant a rate hike. The US Federal Reserve Bank does not operate in the best interests of the global economy – it is strictly interested in the domestic economy. However the interrelatedness of global bourses will invariably impact on the US economy.