05/04/2024
US dollar update
US dollar summary
Ahead of the release of key US labor market data for March, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings, the markets adopted a cautious stance, influenced by recent remarks from Federal Reserve officials and economic indicators. Initial Jobless Claims saw an increase to 221K, exceeding expectations and marking the highest level since January, while Continuing Claims dropped to 1.791M. Despite these figures, the focus remains intensely on the upcoming NFP data, anticipated to show a 200K job addition in March, down from February’s 275K, with the Unemployment Rate expected to hold steady at 3.9%. These labor market indicators come at a time when the Federal Reserve’s interest rate cut expectations are being recalibrated in response to inflation trends and economic strength.
Fed speakers have expressed varying degrees of caution about the likelihood and timing of rate cuts, particularly in light of recent spikes in oil prices which could impact inflation readings and potentially alter the Fed’s easing strategy. Notably, Minneapolis Fed President Neel Kashkari highlighted concerns about inflation readings for January and February, suggesting that rate cuts may not be needed if inflation remains persistent. Similarly, Fed Chair Jerome Powell emphasized the need for more evidence of inflation moving sustainably toward the 2% target before considering rate reductions. These sentiments reflect a broader uncertainty within the Fed regarding monetary policy adjustments amidst evolving economic conditions.
The dollar index experienced a rebound, reflecting the market’s reaction to the Fed’s cautious stance and the anticipation of the labor market report, juxtaposed against a backdrop of robust job additions in recent months and nuanced expectations for wage growth. Investors are now keenly awaiting the March jobs data and subsequent inflation reports, which could significantly influence the Fed’s decision-making in the upcoming months. This period of watchful waiting underscores the complex interplay between labor market strength, inflation dynamics, and monetary policy in shaping the economic outlook.
Market Views & Opinions
Mitsubishi UFJ Financial Group in today’s report ‘ Asia FX Talk – Non-Farm Payrolls key’ says:
“Today’s NFP will be important for markets. Beyond the headline print, markets will also focus on the labour force participation rate, hourly earnings, coupled with employment change in the household survey, to help disentangle between supply and demand, and especially given reports of strong immigration growth into the United States.”
Scotiabank in the recent DAILY FX UPDATE provides a short-term analysis regarding the EURUSD:
“EURUSD short-term technicals: Bullish—The EUR’s technical position has improved significantly over the past day or so. A major rebound from the low 1.07 area is developing after yesterday’s advance. Spot has regained a bit more than half of the March sell-off in spot, opening up scope for a further advance to the 1.0880/1.0920 range. Gains on the week are constructive to this point. A high close on the week would signal a bullish weekly reversal (outside range week). Support is 1.0800/20.”
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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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