The US dollar is continuing to ease after it hit fresh multi-year highs. The greenback has been struggling to etch out a concrete direction because a mix of decent economic data, an ultra-hawkish Federal Reserve, and weakening stocks has made it difficult to determine the direction of the buck. So, what is the latest news impacting the dollar?
On the data front, the ADP Employment Report found that private-sector businesses hired 132,000 workers in August, down from 268,000 in July.
“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals. We could be at an inflection point, from super-charged job gains to something more normal,” said Nela Richardson, chief economist at ADP, in a statement.
The Chicago Purchasing Managers’ Index (PMI) edged up to 52.2 in August, up from 52.1 in the previous month.
Mortgage applications tumbled 3.7% in the week ending August 26, according to the Mortgage Bankers Association (MBA). The 30-year mortgage rate also rose to 5.8% last week.
The rest of the week will be crucial to gauge the trajectory of the US economy in the third quarter. The August jobs report and other labor data, manufacturing and construction activity, and factory orders will be reported.
But while this would be bullish for the financial markets during any other period, investors are concerned about positive data because it would further encourage the Federal Reserve to sustain its tightening efforts.
In a recent speech, Cleveland Federal Reserve President Loretta Mester noted that she anticipates the fed funds rate would climb to above 4% and no cuts to interest rates until at least 2024.
“My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there. I do not anticipate the Fed cutting the fed funds rate target next year,” she said. “It would be a mistake to declare victory over the inflation beast too soon. Doing so would put us back in the stop-and-go monetary policy world of the 1970s, which was very costly to households and businesses.”
The US Treasury market was mixed in the middle of the trading week, with the benchmark ten-year yield up 1.1 basis points to 3.123%. The one-year bill slipped 1.6 basis points to 3.459%, while the 30-year bond added 1.8 basis points. The spread between the two- and ten-year yields was above -30 basis points.
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, fell 0.36% to 108.38, from an opening of 108.75. The index will post a monthly gain of nearly 2% in August.
The USD/CAD currency pair dipped 0.03% to 1.3087, from an opening of 1.3091, at 15:58 GMT on Wednesday. The EUR/USD surged 0.54% to 1.0069, from an opening of 1.0017.