empty
 
 

Forex Analysis & Reviews: DXY: Did Jerome Powell let the dollar slide?
time 01.12.2022 02:30 PM
time Relevance up to, 03.12.2022 01:16 PM

This image is no longer relevant

The dollar and its DXY index fell sharply Wednesday after Fed Chairman Jerome Powell cooled down excessive expectations of dollar bulls. Speaking at the Brookings Institution in Washington, Powell said that the US central bank could slow the pace of interest rate hikes as early as December. In his view, a slowdown at this stage is a good way to balance risks.

At the same time, Powell warned that the fight against inflation is far from over and key questions remain unanswered, including how high rates will eventually need to be raised and for how long—although the final rate is likely to be "somewhat above 4.6%." He also said that the Fed has already been "pretty aggressive" with its rate hikes and will not try to collapse the economy with further steep hikes just to get price growth under control faster.

Now, after these statements by Powell, the probability of a 50 basis point rate hike in December is estimated by market participants at 80%, according to CME Group.

Market participants are now waiting for latest data from the Department of Labor on the state of the US labor market (to be released Friday at 13:30 GMT) to get an idea of its strength. The state of the national labor market, together with data on GDP and inflation in the country are key factors in determining the Fed's monetary policy parameters.

As we noted in our previous review, NFP growth of 200,000, even though it was relatively down from the previous month, when +261K new jobs were created, is an acceptable figure for the Fed, indicating enough a stable state of the US labor market. According to various estimates, 150,000 new jobs should be added every month for the normal functioning of the US labor market.

However, the dollar may continue to decline if the US Department of Labor report disappoints investors. By the way, the ADP report published yesterday with data on the number of new jobs created in the private sector of the American economy fell short of the forecast: employment in November improved by 127,000 (against the forecast of 200,000 and the previous value of 239,000).

While there is no direct correlation between the ADP report and Non-Farm Payrolls, this report is often considered a precursor to official data from the US Department of Labor, and its weaker parameters may suggest a similarly weak report from the Department of Labor.

It is worth noting that market participants ignored Wednesday's positive report from the Bureau of Economic Analysis at the US Department of Commerce with revised data on US GDP in the 3rd quarter (+2.9% against the forecast of +2.7% and the previous indicator of +2.6%) and price indices, indicating an increase in prices and spending on personal consumption by Americans. This indicator (the Core Personal Consumption Expenditure Index, or the Core PCE Price Index, Core PCE) is the main measure of inflation that Fed officials use as the main indicator of inflation, and it still indicates rising inflation in the country.

As for the dollar and its DXY index, the near term prospect—the 105.00 support level on the DXY chart—is still standing and resisting a breakout. Economists say the 105.00 level should keep the dollar index from falling deeper, especially given concerns about the coronavirus in China, the ongoing geopolitical crisis in Europe and recession risks in the world's largest economies. In this situation, economists assume that the dollar should again win as a popular defensive asset.

Today, market participants will pay attention to the publication (from 13:30 to 15:00 GMT) of a whole block of important macro statistics for the United States. If it turns out to be positive, it will give dollar buyers a chance to take a breath. In the meantime, the dollar remains under pressure, also awaiting the publication on Friday of the official report on the US labor market for November.

Jurij Tolin,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade

InstaForex分析评论将让您充分了解市场趋势! 作为InstaForex的客户,您将获得大量的免费服务以实现有效的交易。

  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $10000 more!
    In January we raffle $10000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

ECB rates to peak longer than Fed rates, pushing EURUSD above 1.2

Forex is a place where questions never end. In the first phase of monetary tightening, investors worry about how quickly rates will rise. Then, how high they will grow. Finally

Marek Petkovich 15:10 2023-01-27 UTC+2

Does the US debt ceiling issue pose a threat to the world economy?

Additionally, US President Joe Biden blasted the Republicans, alleging that they want to use the debt ceiling as leverage in economic negotiations, as the markets were getting ready

Jakub Novak 12:11 2023-01-27 UTC+2

The euro has a good chance

According to a survey of analysts, the European Central Bank's decision to raise interest rates by 50 basis points is already final, so the euro has a high probability

Jakub Novak 12:01 2023-01-27 UTC+2

GBP/USD. Overview for January 27, 2023

On Thursday, the GBP/USD currency pair maintained its upward trend. If we consider the daytime, which is the period of greatest activity, the US dollar increased for little more than

Paolo Greco 11:47 2023-01-27 UTC+2

EUR/USD. Overview for January 27, 2023

The EUR/USD currency pair is gradually increasing. This is because nothing has changed over the last day, as we have stated. The present upward trend will not be interrupted even

Paolo Greco 11:35 2023-01-27 UTC+2

Economic growth in the US was strong at the end of 2022

The key takeaway from yesterday's Q4 GDP report was that economic growth in the US was strong at the end of 2022, thanks to the strong labor market and lower

Irina Yanina 11:25 2023-01-27 UTC+2

Soft landing of the US economy could boost markets, but pressure dollar

Mixed economic data from the US had caused a downturn in stock markets, but the situation leveled off later, allowing indices to crawl back up again. The reports indicated that

Pati Gani 10:08 2023-01-27 UTC+2

EUR/USD. U.S. GDP growth was better than expected, but the dollar reacted weakly to the report

The euro-dollar pair reacted erratically to the latest US GDP report. Initially, the price fell to the lower limit of the 1.0850-1.0950 range, then returned to the area

Irina Manzenko 22:52 2023-01-26 UTC+2

EURUSD: Can ECB push EUR higher?

If the market does not go in the direction it is expected to be seen, it is more likely to go in the opposite direction. Will this principle of technical

Marek Petkovich 17:39 2023-01-26 UTC+2

Fresh data on US inflation could determine the path of the Fed

Before the Fed holds its first committee meeting for this year, a report on core PCE will be released, which will definitely have an impact on the decisions the central

Irina Yanina 15:08 2023-01-26 UTC+2
现在无法通话?
提出您的问题,用 在线帮助.