US dollar index plummets due to revised employment statistics and dovish Fed minutes; BLS lowers US employment growth forecast. The largest downward revision since the global financial crisis. Is the Fed rate cut factored in? Powell’s Jackson Hole speech is attracting attention.
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The US dollar is at a standstill, declining for the fourth straight day. Although it briefly rebounded in the first half of the day, it was overshadowed by the U.S. Bureau of Labor Statistics’ significant downward revision of salary statistics.
The Bureau of Labor Statistics (BLS) recently revised its data to show that the U.S. added 818,000 fewer jobs in the year ending in March 2024 than originally expected. This suggests the job market is cooling faster than expected, with each adding about 68,000 fewer jobs. month.
Past salary revisions
Source: BLS, Refinitiv
In early August, the BLS reported 114,000 new jobs in July 2024, lower than June’s revised 179,000 and forecast of 175,000. This is the most significant downgrade since the global financial crisis and suggests the job market is much softer than initially expected. This is not surprising given that some analysts have been touting it for months, but as a minority, their views have been largely ignored by market participants.
The only upside was that investors were already expecting aggressive rate cuts. Given the recent weakness in the US dollar, it appears investors may have already priced in much of the expected rate cut.
This was further encapsulated by the minimal response to the Fed Minute release. Minutes of the meeting showed that Fed policymakers agreed that July might be appropriate for a rate cut, but chose to wait until September. This will no doubt further strengthen expectations for a rate cut ahead of the September meeting.
Federal Reserve President Jerome Powell is scheduled to speak at a symposium in Jackson Hole on Friday. Market participants were expecting volatility and perhaps some clarity regarding the September rate cut. But today’s data means the Fed has little choice but to start cutting rates in September, which begs the question…Given yesterday’s developments, how much of an impact will Powell’s speech have on markets? Will it have an impact?
However, there will also be preliminary S&P PMI data later in the day that may provide further insight into the US economy. While we expect some volatility, we don’t expect the data to have a major impact on rate cut expectations unless they deviate significantly from the consensus.
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US Dollar Index (DXY) Technical Analysis
The US dollar index (DXY) is facing strong selling pressure, but today’s daily candlesticks show indecision with roughly even cores on both sides, suggesting a potential mid-week reversal. I am doing it.
DXY is approaching the critical 100.00 level, which was last broken in July 2023, and a break above this could trigger a faster decline.
My concern is how much future Fed rate cuts are already priced in.
On the upside, the immediate resistance before 102.64 becomes significant lies at the August 5th swing low at 102.160.
USD Index Daily Chat, August 22, 2024
Source: TradingView.com
support
resistance
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Zane is an experienced financial market analyst and educator with extensive experience in the world of retail foreign exchange, economics and market analysis. Although he started out in sales and business development roles, his passion for economics and technical analysis led him to a career as an analyst.
He has held the role of an analyst for the past three years, honing his skills across a variety of financial disciplines, including technical analysis, interpretation of economic data, price action strategies, and analysis of geopolitical influences on global markets. Currently, Zane is pursuing the Capital Market & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), with expertise in Fixed Income Fundamentals, Portfolio Management Fundamentals, Stock Market Fundamentals, and Capital Markets. I have completed the Introduction to Financial Markets and Introduction to Financial Markets modules. Fundamentals of derivatives.
He also appears regularly on South African radio and television programs, providing insight into global markets and the economy. Additionally, he contributed to the development of a Financial Markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF Level 6 in South Africa.
