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US Labor Market Dims, Dollar is Underpressured

by Didimax Team

The United States Dollar index or it is also called as DXY weakened below the 102.00 threshold in Asian trading on Wednesday (03/May). It was weighed down by the slump in JOLTs data in March. 

The deterioration in U.S. job openings underscored a dimming economic outlook. Besides that, it also raised concerns ahead of the Fed's policy announcement.

The publication of JOLTs data last night showed the available job openings were 9.59 million in March. This number was lower than expectations of 9,775 million, and fell significantly from 9,974 million job openings in the previous period. 

The job vacancy data has even continued to decline in the last three months. However, the current JOLTs data is still higher when calculated on an annual basis.




American Labor Market may Help to Fight Inflation

The decline in job openings in the first quarter of 2023 indicates that the American labor market could help the Fed's efforts to fight inflation. The Fed itself will announce its latest interest rate and monetary policy in the early hours of Thursday. 

Markets are already expecting the rates made by US central bank will be 25 bps higher. For the rest, they want to find further clues about the next policy direction in Jerome Powell's statement. 

The currency movements this week depend on whether the Fed's statement will be hawkish or dovish. But the analysts expect Powell's remarks to be more hawkish than market expectations.

That is as inflation remains too high and the labor market tightens, despite the recent decline of both indicators. This was stated by Joseph Capurso As a head of international economic analyst in Australia. 

Banking Crisis Weighed down the Fed’s Policy 

In addition to inflation and employment, Fed policy this week was also weighed down by residual problems from the banking crisis. This still becomed a consideration owned by the market participant.

The United States government's budget plan also poses potential risks with respect to the debt ceiling that will reach the limit on June 1.

Besides that, the FOMC statement and Fed interest rate announcement for May 2023 has a high impact on USD. The FOMC gives a statement on monetary policy on average 8 times a year, along with interest rate announcements. 

The determination of interest rates usually depends by voting. The results of individual voting and comments are contained in the FOMC statement released after the meeting. 

The Fed’s Rates Raise Again

In addition to interest rates, the statement also contains other policies and forecasts of future economic conditions. This situation can affect the central bank policy.

At the last meeting on March 22-23, Federal Reserve raised its benchmark interest rate again by 0.25% to a level of 4.75% to 5.00%. This number was in line with market forecasts. 

That increase is the 9th time in a row, and is also becoming the highest level of interest rates since 2007. The aggressive rate hikes were triggered by a surge in US inflation to a 41-year high. 

The Fed's decision to raise interest rates is in line with the expectations of most market participants. That was although some expect the Fed to pause the tightening cycle to shore up financial stability. 

US economy Overall is still Positive 

The statement said that there is a possibility of another rate hike at the next meeting. It means that the US inflation rate will still be at 6.0% at the end of February 2023.

That position is well above the target of 2.0%. The Fed claims that currently the American economy in general is in a positive condition, even though in mid-March 2023 it was shocked by the collapse of Silicon Valley Bank. 

The committee mentioned that the latest United States economic indicators show moderate growth in spending and production. Job gains have increased in recent months at a rapid growth rate. 



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