Federal Reserve President Jerome Powell sparked a global equity rally yesterday after he confirmed the Fed would partake in a slower rate-hiking pace.
Overview
The S&P closed 3.0% higher, and the U.S. dollar was slightly weaker to start the day as traders awaited the highly anticipated payroll data. The greenback has been under pressure this week and equities have received a boost following confirmation from Fed Chief Powell that we can likely expect slower rate hikes in the future and as China loosened its Covid Zero policy. The Bloomberg Dollar Spot Index was down 1.5% and reached a five-month low before this morning’s jobs data.But the greenback’s fortunes have quickly turned around. The U.S. dollar is rallying across the board following strong jobs data. Non-farm payrolls rose 263K in November, beating estimates of 200K. The net revisions from the last two months are down 23K but that downward revision was not enough to knock the luster off the headline reading. The unemployment rate remained at 3.7%. The strong data will not help the argument that the Fed should slow down its rate hiking cycle and may lead to an increase in what investors believe will be the peak rate in 2023. As such, the knee-jerk reaction has been widespread dollar strength. Later this morning, the Fed’s Barkin will discuss the labor market In Richmond. Chicago Fed President Charles Evans has a busy day as he is speaking at two different events but will focus on financial regulation, so his comments are unlikely to move the greenback.
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What to Watch Today…
- No major economic events are scheduled for today
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CAD ⇓
The Loonie fell 0.5% against USD this morning as data showed that Canada added just 10,000 jobs in the month of November. Though the Canadian unemployment rate decreased to 5.1% versus 5.3% expected, this positive print was not enough to keep up with strong payroll data out of the US.
JPY ⇓
The Japanese yen experienced wild swings over the past few hours. The yen rallied as much as 1.3% after a new Bank of Japan board member called for a review of the BoJ policy. Usually, a review of policy is used to justify a change in policy, according to economists interviewed by Bloomberg News. However, the yen quickly gave back all of those gains, and then some after the U.S. jobs report sparked a widespread dollar rally.
