06/10/2023
US dollar update
USD dollar Summary
The US Bureau of Labor Statistics (BLS) released its report on Friday, indicating that Non-farm Payrolls (NFP) in the United States experienced a substantial increase of 336,000 in September. This figure exceeded market expectations, which had anticipated a lower number of 170,000. The unemployment rate remained steady at 3.8% and additional information from the jobs report revealed a slight dip in annual wage inflation, as indicated by the change in average hourly earnings, which decreased from 4.3% to 4.2%. On a monthly basis, the average hourly earnings were unchanged at 0.2% but below the market consensus of 0.3%.
The US Dollar performed profits against its primary counterparts in the initial response. As of the current moment, the US Dollar Index stands at 106.58, about 0.7% higher compared the last week’s close price. Federal Reserve officials have suggested the potential for further tightening of monetary policy later in the year, but they have not definitively endorsed this outlook. The NFP results released today might influence policymakers to lean toward another interest rate increase in 2023, which would keep yields and the US dollar inclined toward higher levels.
Market Views & Opinions
Societe Generale anticipates that EURUSD will reach 1.15 by the middle of 2024 in the baseline scenario, which assumes a mild economic downturn. However, in the scenario where there is no recession, they project EURUSD to be at 1.02. Societe Generale thinks that the prospect becomes uncertain in the event of a severe economic downturn, as the initial response would likely disrupt the correlation between EURUSD and interest rates temporarily.
ING in a recent analysis mentions that “The dollar has rallied about 2% since the last FOMC meeting in September, when the Fed cut in half its forecast for 2024 easing. Higher rates across the US curve since then have clearly helped the dollar. Our calculations suggest that the US 10-year Treasury yield at 5.00% would be consistent with EUR/USD trading at 1.02 given their recent relationship. Even though November and December are seasonally weak months for the dollar, it is hard to call a turn in the dollar trend before year-end.”
IMPORTANT DISCLAIMER
The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
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