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Market Update

• Posted by currencies in Dollar, Economy, Fed, Inflation, Rate Hikes, UK, Uncategorised
• October 6, 2023
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After hearing from 3 members of the Federal Reserve give their view on how they prefer the US central bank should go forward and how its performing, suggest further USD strength.

Firstly, the discussion was around the high treasure yields in the US, that they are hoping will flatten inflation. Right now, US bond yields has reached a 16-year high, meaning that investors are seeking to a low-risk investment that also fuels high returns.

As we know, holding government bonds means that to be entitled to guaranteed return your funds are locked into a certain maturity date. Meaning the flow of money has drastically decreased, effectively meaning household spending is on a decline.

There were also comments regarding further actions from the Federal Reserve, and it’s members suggest that to full tackle inflation one more rate hike would be required in 2023 and there after holding the interest rate for longer than initially anticipated. These two factors have been fundamental to USD strength in the last few weeks, and we can see momentum that it will continue.

For the UK we see continuation in house prices dropping off, September recording a decline of 0.4% with high mortgage rates being the main contribution. Meaning that housing prices are within level of where they were in the beginning of 2022.

Focus for today is, non-farm payroll that’s released at 1.30pm, as we know it’s one of the more volatile data releases when it comes to USD pairs.

Earlier in the week, we saw a drop off in the private labour market for the US. Keeping that in mind, the unemployment rate is suggested to drop off in September. With the private sector seeing a halving of created jobs. For the unemployment rate to drop off, figures need to be positive this afternoon for the non-private sector. While writing, it’s forecasted to create 17k less jobs than back in August.