To be honest... I think the current move of US-DOLLAR doesn`t make any sense.
I keep it simple and short, otherwise I`d have to break the mold.
The data are mixed but do overall show a slowdown in the economy but at the same time rising inflation.
Non-Farm-Payrolls: 199.000 less jobs than expected and the worst result since december 2020. This clearly shows a cool down in the NFP-Sector and is overall bearish for the US-Dollar.
Unemployment Rate: 3,9% and a positive development considering that previous rate has been at 4,2%. Overall bullish fort he US-Dollar.
Average hourly earnings: 0,6% and way higher compared to the previous month. This is overall bullish for the US-DOLLAR due to higher inflation.
Average weekly hours: 34,7 and less than expected.
The problem here in my opinion is the fact that earnings per hour soared while less jobs were created. This is a typical sign of inflation and part oft he wage-price-spiral.
Considering that FED has to and will fight inflation as its priority number one after their „transitory-fail“ to gain back reputation Jerome Powell & Co could turn from best friends to fiends for the stockmarket as financial injections probably won`t be an option anymore, whether the economy cools down or not.
This is clearly negative for the overvalued equity-market but not by all means for the US-Dollar.
Simply put: The FEDs in a quandra. Can`t provide more liquidity due to high inflation to push growth and employment and has to hope everything is going to be fine.
Rising yields do indicate expectations for higher inflation in the market and would offer an alterantive to stocks in the near future (Bonds). They are also generally good for the bank-sector and obviously not good for tecs due to high costs which are not as easier to finance with higher interest-rates.
But here is a catch.. we know how irrational but faithful the market is... if it turns out the market hopes the FED to ignore their plans and "slow it down" in order to boost the economy again if future results are not as good as expected we might see another rally in stocks and so a falling US-Dollar. This would be more like the less likely scenario in my opinion...I mean Bidens is on Powells tail.
Risk-Off is generally good for the US-DOLLAR as a safe haven. If FED continues as announced and planned the US-Dollar is likely to move up while this move turns out to be a fake.
One of these charts is lying, but I see a higher probabillity of a rising US-Dollar under these circumstances.
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Great commentary. I agree that one of these charts is lying..... Leveraged funds have the highest number of open long positions on the US Dollar according to Bloomberg data in a long time. The fall in the DXY is interesting to monitor. On the other hand, the market is starting to consider that the ECB is going to trail FED actions sooner due to inflationary pressures in the Eurozone hence pushing interest rate differentials higher
Trading2ez
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@GrizzlyBearBee,Excatly! I`ve mentioned that earlier aswell (but on telegram) and is one of my concerns as the inflation hits Europe harder than expected. But I think rising yields and the end of TINA (there is no alternative) would hit first and harder if stocks, or deflational sectors such as TEC fall. This could cause a huge wave of liquidations since the marget-debt-level is as high it has never been before. Let`s see =)