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February 5th - In a report, Sanjay Raja of Deutsche Bank Research stated that the prospect of a Bank of England rate cut has significantly strengthened, but the pace of cuts may be relatively slow. The Bank of England decided on Thursday to keep interest rates unchanged at 3.75% by a 5-4 vote, and hinted at possible further rate cuts in the coming months. Raja said, "The risks remain skewed towards a slower pace of rate cuts, but we remain confident that the Bank of England will cut rates twice this year."U.S. Treasury Secretary Bessenter: Warsh is fully qualified to be the Federal Reserve Chairman.U.S. Senate Majority Leader Thune: Democrats demands for funding to the Department of Homeland Security are "unrealistic".U.S. Treasury Secretary Bessant testified before the Senate Banking Committee, reiterating his testimony from the House Financial Services Committee the previous day.February 5th - U.S. job openings unexpectedly fell to their lowest level since 2020 in December, while layoffs rose slightly, further indicating weak demand for labor. Data from the Bureau of Labor Statistics on Thursday showed that job openings fell to 6.54 million in December from a revised 6.93 million in November, below market expectations. The decline in job openings was primarily driven by professional and business services and retail, while the increase in layoffs reflected larger-scale layoffs in the transportation and warehousing sectors. Hiring increased somewhat, but remained at a low level overall. The data suggests that businesses remain cautious about the pace of hiring as they assess their workforce size and the outlook for economic activity. This data also reinforces the Federal Reserves assessment that wage growth is not a source of inflationary pressures. The report showed that the ratio of job openings to job losses was 0.9 in December, a measure closely watched by the Federal Reserve to gauge the balance of labor supply and demand. This ratio peaked at 2 to 1 in 2022.

Focus on US inflation as US Dollar Index fights to hold around 20-year high of over 108.00

Alina Haynes

Jul 13, 2022 10:54

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The US Dollar Index (DXY), which oscillates close to the greatest levels in two decades, which were attained the day before, illustrates the market's nervousness prior to substantial US inflation data. As a result, the dollar index versus the six most important currencies regains recent losses and defends the 108.00 level, remaining at 108.16 during Wednesday's Asian session.

 

The White House (WH) statement and subpar US data contributed to the DXY's decline from the previous day's multi-year high. In a memo, the White House said that "US economic statistics, notably the June jobs report, are inconsistent with a recession in the first or second quarters," according to Reuters on Tuesday. The news helped the market book profits ahead of crucial data and events.

 

Additionally, in June, the US NFIB Business Optimism Index registered 89.5 vs. 93.1, its lowest reading since early 2013.

 

It should be noted, though, that the most recent economic projections from the International Monetary Fund (IMF) seem to have reignited market concerns and increased demand for the US dollar. The IMF lowers its US GDP growth prediction for 2022 from 2.9 percent in late June to 2.3 percent as a result of fresh US data. The issues of growing inflation and the significant Federal Reserve interest rate increases necessary to control prices were highlighted by the Fund's inclusion of the new estimates in the entirety of its annual assessment of the U.S. economy, according to Reuters.

 

Concerns about a viral variant spreading to Shanghai and causing a lockdown in Wugang, Henan Province, came from China at the same time.

 

The main obstacle to the DXY's movements is probably the market's anxiety ahead of the critical US CPI for June, which is expected to increase to 8.8 percent YoY from 8.6 percent YoY. Prior to the announcement of the inflation data, Thomas Barkin, president of the Federal Reserve Bank of Richmond, said, "There is a road to lower inflation, but a recession is possible."

 

Despite the brief recovery, Wall Street benchmarks ended in the red as 10-year US Treasury rates fell for the second day in a row, to about 2.97 percent. Additionally, Wednesday's opening of the S&P 500 Futures shows minor increases.

 

Future DXY traders will need access to US inflation data, but they may also find fun in news from China and speculations surrounding Russia. DXY may experience more increases if the US CPI shows a favorable surprise.


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