The dollar fell on sluggish data, markets betting the Fed is nearing the end of its run

The main trigger was the JOLTS data, which is starting to point to a moderating labor market

NEW YORK ( – The US dollar slumped to a two-month low in late trading Tuesday (Wednesday morning WIB), as another round of weak economic data reinforced investors’ bets that the Federal Reserve was nearly done with a tightening cycle even as other central banks continued to hike rates. interest rate to overcome high inflation.

Sterling rose to a new 10-month high against the dollar, while the euro hit its highest since February.

Data showing US job vacancies in February fell to the lowest in nearly two years, and a continued decline in factory orders, weakened the dollar as they suggested that interest rate hikes may be coming to an end.

Job vacancies, a measure of labor demand, fell by 632,000 to 9.9 million in February, the lowest since May 2021, according to the monthly Job Opening and Labor Turnover Survey or JOLTS report.

“The main trigger was the JOLTS data, which is starting to point to a moderating labor market. So we have lower pressure on the dollar and we are seeing yields as well,” said Vassili Serebriakov, foreign exchange strategist at UBS in New York.

“The question is: Is the dollar hurt more by lower yields or helped more by weaker equities in this type of environment? risk-off? It looks like yields have a bigger impact.”

On Tuesday (4/4/2023), the yield on the two-year US government bond, which tends to reflect interest rate expectations, fell 12 basis points (bps) to 3.86 percent. For March, the two-year yield plunged nearly 74 basis points, its worst monthly decline since January 2008 amid the global financial crisis.

US factory orders also fell for the second month in a row, falling 0.7 percent in February after slumping 2.1 percent in January.

In afternoon trading, the dollar index fell to a two-month low of 101.45 and was last down 0.4 percent at 101.58.

“We have a lot of data to digest this week that will show that the US economy is resilient enough to withstand the mentality of ongoing Fed rate hikes or if the market is going to get a breakthrough,” said Juan Perez, director of trading at Monex USA in Washington.

“Add bad data to the banking crisis, plus rising oil supply costs, and you may have more favorable odds for a rate cut next year.”

On Tuesday (4/4/2023), futures markets priced the odds of a 25 basis point rate hike in May, with another opportunity leaning towards a break from the Fed. On Monday (3/4/2023), the probability of a 25 basis point hike next month was more than 65 percent.

Interest rate markets are also pricing in a Fed cut by the end of December.

Sterling rose to $1.2525, its highest since June 2022, after breaking a significant level of resistance. The pound last changed hands at $1.2497, up 0.7 percent.

The euro hit 1.0973 dollars, its highest in two months. The euro was last up 0.4 percent at $1.0951, with traders confident that the European Central Bank has more rate hikes to come.

“We have had the view for some time that the dollar has peaked and we are sticking with it. We have a forecast of 1.15 dollars for the euro against the dollar in the second half,” said Serebriakov of UBS.

The Australian central bank (RBA), as expected, kept interest rates unchanged at 3.6 per cent, snapping 10 straight hikes as policy makers said additional time was needed to “assess the impact of rate hikes on the current and economic outlook”.

The Australian dollar was last down 0.6 percent at $0.6743. Elsewhere, the dollar fell 0.6 percent against the Japanese yen to 131.635.

Also read: Gold strengthened, perched above 2,000 US dollars for the second session
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Translator: Apep Suhendar
Editor: Click Dewanto


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