The US Dollar maintains its strength as investors remain cautious.
After rising higher on Wednesday, the US Dollar maintained its resilience versus its competitors on Thursday. The USD Index, which measures the value of the US dollar against a basket of six major currencies, rose beyond 102.80. In the European session, reaching its highest level in nearly a month.
USD maintains its stellar weekly gains.
On Wednesday, the Nasdaq Composite sank 2.2%, the S&P 500 fell 1.4%. And the Dow Jones Industrial Average declined 1%. The 10-year US Treasury note yield surpassed 4.1% for the first time since November.
According to figures released on Wednesday by Automatic figures Processing (ADP). Private sector employment in the United States increased by 324,000 in July. This report exceeded the market’s forecast of a gain of 189,000. Providing more support to the USD. The total for June was reduced from 497,000 (the highest since February 2022) to 455,000.
“The economy is performing better than expected. And a strong labor market continues to support household spending,” said Nela Richardson, ADP’s chief economist. “We continue to see a slowing in wage growth without widespread job loss.”
According to the US Bureau of Labor Statistics, the number of job opportunities on the final business day of June was 9.58 million. On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) reported. This figure follows 9.61 million openings in May and was somewhat below than the market’s projection of 9.62 million.
The US ISM Manufacturing PMI rose little to 46.4 in July from 46 in June. This number was lower than the market forecast of 46.8 and indicated that business activity in the manufacturing sector was continuing to decline.
The employment component of the ISM PMI survey fell from 48.1 to 44.4.
“Banks reported that, overall, standards are currently at the tighter end of the range for all loan categories.” Banks reported stricter levels of requirements in every loan category compared to the July 2022 survey,” the Fed stated in the July 2023 Senior Loan Survey. SLOOS stands for Officer Opinion Survey on Bank Lending Practices.
According to the ISM, the Chicago PMI increased to 42.8 in July from 41.5 in June.
According to the Federal Reserve Bank of Dallas’ Texas Manufacturing Survey, the headline Manufacturing Business Index increased to -20 in July from -23.2 in June.
Inflation in the United States, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, declined to 3% year on year in June from 3.8% in May, according to the US Bureau of Economic Analysis on Friday. This number was lower than the market’s forecast of 3.1%.
The Core PCE Price Index, the Federal Reserve’s preferred measure of inflation, came in at 4.1% year on year, down from 4.6% in May and below the Fed’s target of 4%. 4.2% is the market projection. According to the publication’s further statistics, Personal Income and Personal Spending climbed 0.3% and 0.5% on a monthly basis, respectively.
Minneapolis Federal Reserve Bank President Neel Kashkari told CBS over the weekend that he wasn’t sure if the Fed was done raising interest rates. In his remarks on the labor markets, Kashkari stated that a little increase in the unemployment rate would not surprise him.
Fed raised its policy rate by 25 basis points (bps) to a range of 5.25%-5.5%.
Following the July policy meeting, the Fed raised its policy rate by 25 basis points (bps) to a range of 5.25%-5.5%, as expected. In the post-meeting news conference, Fed Chairman Jerome Powell declined to confirm another rate rise this year and stated that every policy meeting will be broadcast live. “If “We see inflation coming down credibly, and we can move to neutral and then below neutral at some point,” Powell told reporters, emphasizing that the policy was already tight.
DXY benefits from a bad market sentiment following Fitch’s reduction of the US credit rating.
Fitch Ratings lowered the US government’s credit rating to AA+ from AAA late Tuesday. Citing expected budgetary deterioration over the next three years. And a large and increasing general government debt load. As a result of this development, market players Stay away from risky assets. Enabling the US Dollar to gain popularity as a safe haven.
The number of first-time applications for unemployment benefits in the United States increased to 227,000. In the week ending July 29, according to the US Department of Labor on Thursday. Other US statistics indicated that unit labor costs grew 1.6% in the second quarter. Following a 3.3% increase in the first quarter and falling far short of the market consensus of 2.6%. Market players will be watching the July ISM services PMI survey intently ahead of Friday’s jobs data.
