Urgent: The dollar is collapsing and bets on its rise are falling.. and the Fed, "we don't know what's next"
Investing.com - The US dollar index fell sharply on Friday, down 1.89% to 110,677, after mixed employment data caused turmoil over the outlook for the Fed's interest path.
The data showed that the labor market is still able to add more jobs despite the news of the increasing layoffs, the most prominent of which was today Elon Musk laying off 50% of the Twitter workforce, and the suspension of Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) new employment activity at the same time. Present. But at the same time, US unemployment rose from 3.6% to 3.7%.
The US dollar index rose after the data, but the market remained in turmoil, as the data was mixed, which may prompt the Fed to slow the pace of rate hike.
The report indicated that the average hourly wage increased by 0.4%, but the growth in wages fell to 4.7% on an annual basis, after it recorded 5.0% last month, which means that wage inflation is declining.
The Fed's rate watch tool now suggests that the Fed will raise rates by 50 basis points, to 66%, to 4.25%-4.50%.
But the Fed indicated that it will slow down the rate of rate hike, and will not stop, and the rate peak is higher than it was in the past. However, the market priced the peak interest rate down from 5.25% before the data to 5.09% near the end of today's trading.
Expert opinions
"Despite the mixed data, we don't think the Fed is going to look at that data and think it's made solid progress toward controlling inflation," Thomas Simmons, of Jeffers, told Reuters.
He continued, "Wage growth is slowing, job additions are declining, but neither is declining fast enough. Today's data keeps the door open for a 75 basis point rate hike in December, but we should be aware of the important data separating now and the timing of the next meeting."
Betting on the dollar
Speculators cut long dollar positions to $3.08 billion for the week ending November 1, compared to $10.21 billion last week, according to Reuters calculations.
Federal Reserve Chairman Jerome Powell raised expectations of a rate hike aggressively causing a strong rally in the US dollar after the Fed meeting on Wednesday. But the scene now depends on the inflation data that will be released next Thursday.
The Fed is confused and confuses the markets
The Fed members' statements were now mixed to show the uncertainty facing the US central bank.
Powell has previously argued that the repercussions of over tightening are much easier to bear than the repercussions of inflation taking root in the economy.
Powell said he is not sure whether the Fed will enter the economy into recession or not due to monetary policy, and the future rate hike remains entirely dependent on the incoming data.
Today, a number of Fed members spoke after the data, including Thomas Barkin, who spoke to CNBC after the data: “The labor market remains strong,” but hinted at increased caution in the pace of rate hike, although it does not put a final rate on what should be He did it in December.
"When you put your foot on the brake you think, you think of a switch...and sometimes you move on purpose, and that's what I'm prepared to do," Barkin said. "I think the repercussions of slowing down the lift, and holding the lift for a longer period of time, are the best now."
Evans also spoke to Reuters: "From now on I don't think proactive action is the most important, I think the right level of tightening should be looked for." "Steping down from a 75 basis point hike gives us time to see more data before events run out, which now makes sense for me."
"I think it's time to think about shifting from rapid rate hikes to looking at the pace of raising," Collins said in a letter to Brookings. She added that the Fed will have to raise rates to more than 4.6%, which is the target set last September, but it is too early to think about the new high level.
While Neel Kashkari said in an interview with the Associated Press the jobs report is "pretty healthy," and explained that the labor market is strong and the Fed should do more, but that a slower pace of the hike should be adopted.
"Previously I expected the interest rate to peak at 4.9% in March-April 2023." "Given what I want now, I would expect the rate to go higher than this, but to what extent, I don't know."
Reuters reports that the Fed has not yet hit a nail in the coffin of high inflation to the highest pace in 40 years, but the Fed prefers to expand the time range to fight inflation.