The United States Dollar starts the morning off on the back foot today as US jobless claims show some slight softening in the labor market.
Overview
This is welcome news for the Federal Reserve – their target of returning to 2.0 percent inflation by the end of 2024 is doubtless a tough goal to reach and requires substantial labor market weakness. Signs now point to just one further rate hike this year at the May meeting of the Fed. Congressional representative Kevin Hern disclosed this yesterday from Jerome Powell’s private meeting with US lawmakers, reinforcing the current dot plot view.Outside this morning’s jobless claim data, month and quarter-end flows dominate markets and show a broad USD selloff across the board. Projections of the end of the Fed’s tightening cycle drive equity prices up and the Buck down. This morning’s flash GDP reading for the fourth quarter of 2022 reinforced this trend, showing a slight slowdown in the US economy from expectations. Due out tomorrow, the Fed’s preferred inflation reader is expected to show a slowdown and give the central bank further license to wrap its tightening cycle.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The single currency gained against the Buck handily this morning, posting a gain of over half a percent since yesterday’s close. This morning, German inflation showed a sharp slowdown from February, only rising 7.8% versus the prior month’s 9.3% gain. While this is undoubtedly good news for the nation, it is still not enough of a decline to give the European Central Bank any real breathing room at its next interest rate decision. Governing members have stressed the importance of tackling inflation in the Eurozone and will likely have to continue their tightening cycle beyond the Fed’s targets to do so.
CHF ⇑
The Swiss Franc is up roughly half a percent on USD as the financial sector crisis within the nation subsides. CHF’s role as a traditional safe haven was jeopardized over the last month because of the failure of Credit Suisse, but the subsequent buyout seems to have calmed the panic within the nation and returned CHF to its prior strength. Though the risk-on sentiment currently dominates markets, USD has been a bigger victim of the flight from safety than CHF.
