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Dollar Steadies After Fed Officials Play Down Pivot Hopes

Forex Oct 05, 2022 04:04AM ET
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By Geoffrey Smith

Investing.com -- The dollar steadied and pushed higher in early dealings in Europe on Wednesday, after senior Federal Reserve officials played down suggestions of an imminent 'pivot' in its monetary policy amid signs that the U.S. labor market is cooling down.

By 03:40 ET (07:40 GMT), the dollar index, which measures the greenback against a basket of six advanced economy currencies, was up 0.4% at 110.48, taking the edge off a fall of nearly 2% in the last week.

The dollar had slumped on Tuesday after the Labor Department reported one of the biggest ever monthly drops in the number of job vacancies, a relatively clear and strong signal that the Fed's series of rate hikes this year is forcing companies to pare back their hiring plans.

However, San Francisco Fed President Mary Daly had told CNN after the numbers that "There's a lot of room to slow the labor market before we get into severe recessionary conditions that people are predicting," while Philip Jefferson, one of the recent additions to the Fed's Washington, D.C.- based board of governors, repeated the Fed's willingness to accept "a period of below-trend growth" as it fights to bring inflation down.

The so-called JOLTs survey was the first of a series of big numbers from the U.S. labor market scheduled this week, which will culminate with the official payrolls report on Friday. In the meantime, ADP will report its assessment of private-sector hiring in September at 08:15 ET (12:15 GMT).

"We remain skeptical that the Fed is about to pivot on the back of slightly softer U.S. data this week," said ING analyst Chris Turner in a note to clients, saying that he expects the dollar correction to "run out of steam" no lower than 108.50. Focusing on the tight labour supply challenge, the Fed told us in September that unemployment needs to rise from its current 3.7% to 4.4% next year to prevent the Fed funds from going any higher than 4.50% to 4.75%.

The pound and euro were the two weakest of the major currencies, losing 0.5% and 0.3%, respectively, ahead of a key meeting of oil exporters in Vienna that is set to announce radical output cuts in order to support prices. As net energy importers, higher oil prices typically act as a headwind to the U.K. and Eurozone economies.

The massive increase in the cost of the Eurozone's energy bill was evident again earlier in German trade data for August, which showed the country's second-smallest monthly trade surplus in 30 years (the smallest was posted only three months ago). There were also downward revisions to S&P's final purchasing managers indices for all four of the Eurozone's big economies.

The pound, for its part, also continued to struggle with the new government's mixed messaging over its spending plans, an issue which may not be resolved even with Prime Minister Liz Truss's speech to the Conservative Party conference later Wednesday.

One currency to hold its own against the dollar was the kiwi, after the Reserve Bank of New Zealand raised its key interest rate by 50 basis points, as expected, to 3.50%. That contrasted with the Reserve Bank of Australia's decision to hike by only 25 basis points on Tuesday, an event that had triggered the broader rally on the dollar crosses on Tuesday by encouraging hopes of an early end to global rate hikes.

The central banks of Iceland, Romania and Poland all have their regular policy meetings later Wednesday.

Dollar Steadies After Fed Officials Play Down Pivot Hopes
 

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Comments (6)
Ernie Keebler
Ernie Keebler Oct 05, 2022 7:35AM ET
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The fed spent $trillions over 2 decades to raise inflation and said we can live with overshooting for awhile, NOT, less,than a year of inflation and they fight tooth and nail to bring it down and would be happy with below trend growth, bull again. The Feds will do whatever it takes to accelerate the transfer of wealth to the 1% because they are tied to and belong to the 1%
Potty Grunner
Potty Grunner Oct 05, 2022 6:23AM ET
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just pure market manipulation
mahir barut
mahir barut Oct 05, 2022 5:13AM ET
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winter is coming, everyone knows inflation haven't peaked yet
Oct 05, 2022 5:02AM ET
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crude oil inventory analysis might set off the bears today
John Berry
John Berry Oct 05, 2022 4:52AM ET
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I hope unemployment goes to 20% and then see what the big bad FEDS do. Truthfully If the unemployment numbers counted the people who are still unemployed and no longer collect unemployment the unemployment rate is closer to 10% already
Chrismi Germain Regis
Chrismi Germain Regis Oct 05, 2022 4:52AM ET
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Are you also wishing for hyperinflation without saying it? Are you aware of the Fed pivoting is Americans worst nightmare? Or are you too exposed on risk assets and only care of your intelligent self? Do you see a way for the US to increase supply in order to meet demand?
Warm Camp
Warm Camp Oct 05, 2022 4:36AM ET
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Touting “pivot” is a baseless, irresponsible media talk, not supported by any facts or even words from the Fed.
Vnod Be
Vnod Be Oct 05, 2022 4:36AM ET
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it is just non existing reason to pump market at low volume and dump stocks at better price and high volume.
John Berry
John Berry Oct 05, 2022 4:36AM ET
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Exactly. Another pump and dump FUD article
NaturalGas Speculator
ForeverOPEChater Oct 05, 2022 4:36AM ET
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Australian central bank flinched with Bank of England. that's why markets assumed FED will flinch soon so buy now they say but FED didn't say anything.
Kris Jay
Kris Jay Oct 05, 2022 4:36AM ET
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100% correct.  its as if some agency, some source is feeding media, perhaps trying to buoy the market for mid-terms that there is a "fed pivot".
Chrismi Germain Regis
Chrismi Germain Regis Oct 05, 2022 4:36AM ET
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Exit liquidity.
 
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