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King Dollar: Down But Not Out as Jobs Data May Quash Fed Pivot Hopes

Forex Oct 04, 2022 03:31PM ET
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By Yasin Ebrahim

Investing.com -- The dollar suffered a bruising encounter Tuesday, but its swing lower may come to an abrupt end in the coming days as Friday’s U.S. monthly jobs data has the potential to drown out recent hopes of a Federal Reserve pivot.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 1.3% to 110.220.

The dark days for the dollar, which have seen it shed about nearly 4% from its September peak, “shouldn’t have legs,” ING said, flagging Friday’s nonfarm payrolls report as a “potential trigger for a fresh hawkish re-pricing and a positive event for the dollar.”

Data on Friday is expected to show the U.S. economy created about 250,000 jobs last month, below the 315,000 seen in August, with average hourly earnings forecast to remain steady at about 0.3% and the unemployment rate at 3.7%.

As the labor market has remained tight, threatening an uptick in wages, the Fed has made it clear that slowing the economy, and job growth remain central to its plans to cool inflation.

Against the backdrop of red-hot inflation, Fed chairman Jerome Powell has insisted on a need-for-speed approach to get its benchmark rate into restrictive territory and has repeatedly pushed back against bets on a Fed pivot.

But a recent wave of softer global economic data has revived hopes of a Fed pivot, pushing Treasury yields lower and pressuring the greenback.

“Powell roiled markets back in September, as he strived to dispel the market’s belief in a Fed pivot in 2023; but his efforts are beginning to look more questionable as we approach year end,” Oxford Economics said in a note.

Yet, even if the Fed does signal a pause may be in the offing, the Fed’s fund rate, at 3% to 3.25%, still has plenty of room until reaching an expected peak, or terminal rate, of around 4.5% leaving ample ammunition for the dollar to snap its downturn.

“The US domestic story remains rather solid, leaving the Fed tightening prospects alive even if markets have recently revised the expected terminal rate to sub 4.50% levels,” ING said in a note.

King Dollar: Down But Not Out as Jobs Data May Quash Fed Pivot Hopes
 

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Comments (6)
PM Coffee
PM_Coffee Oct 04, 2022 7:58PM ET
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The Biden administration has been double counting job numbers since January and we’re called out on it. We might actually get a real jobs number this time…. Or not…
William Bailey
William Bailey Oct 04, 2022 7:49PM ET
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Silly pivot suckers …. Bull trap will stampede you as soon as bears are slautered
Eric Moon
Eric Moon Oct 04, 2022 6:00PM ET
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the stock market is in a SEVER down trend. Get ready to keep shorting the s&p. got another 50+% to go on downside. bye bye wall street gangsters!
Fat Nugget
FatNugget3 Oct 04, 2022 5:58PM ET
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https://investing.com has got to do something about the bots
PainkillerX
PainkillerX Oct 04, 2022 5:58PM ET
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exactly the comments section is basically useless at this point
Jason Crawford
Jason Crawford Oct 04, 2022 5:58PM ET
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PainkillerX i dont know. I really want to know who elizabeth stark is. She sounds like a great trader. Maybe tony's sister??
jason xx
jason xx Oct 04, 2022 4:45PM ET
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It has nothing to do with jobs the United Nations told the central banksters they are being reckless and need to ease off. They are risking their independence if they dont
G D
G D Oct 04, 2022 4:45PM ET
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Go lose your life savings with Bitcoin, Jason
EL LA
EL LA Oct 04, 2022 3:54PM ET
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Fed actions take 6 months to reach fruition. If the fed has already gone too far, what then?
Angus Malarkey
Angus Malarkey Oct 04, 2022 3:54PM ET
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Return to QE.
志彬 吳
志彬 吳 Oct 04, 2022 3:54PM ET
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back to nightmare
 
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