The U.S. dollar stabilised this morning after a week of heavy decline and wavering interest rates. After dropping almost 1% over the course of this week, the dollar finally tipped into a positive state, trading 0.1% higher than the six other currencies in the U.S. Dollar Index (USDX) – Euro, Pound, Yen, Canadian Dollar, Swedish Korner, and Swiss Franc.
U.S. Dollar finally outruns the cliff edge
Despite this positive tipping point, the dollar registers weak against its recent three-month high. This cooling gives solid indication that the Federal Reserve may be prepping for further interest rate hikes after a slowing down period of economic spending and employment.
APAC Societe General and Global Head of FX Strategy, Kit Juckes noted:
If a weaker dollar is only likely when the signs of slower growth are clear, a stronger euro is only likely when the current gloom about the economy eases.
The U.S. payroll data is expected on tomorrow and, with second-tier figures for as job openings and private payrolls released earlier this week, the Q2 market growth from 2.1% to 2.4% suggests that the U.S. labour market is slipping behind H1 2023 growth targets.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
U.S. ADP figures recorded a further slowdown in the rate of wages growth with the annual increase at 5.9% from 6.2% when comparing the same period of July, year-over-year – the lowest reading since October 2021.
According to HSBC:
The bank is reluctant to forecast a sharp decline [in wage growth rates] given vulnerabilities elsewhere. Still, a toppish USD does not mean a broad reversal lower is imminent. We expect the fortunes for the rest of G10 FX are likely to be mixed in the coming weeks.
