An absolute example of sla. That’s how we can describe the data released on Friday from the US labor market for August. Despite the fact that the Fed was hit with another positive surprise, warning of the rising rate of the labor market, the need to raise rates remains high. The August data can be seen as a quarter of a percentage point increase over the year. Russia was the lion’s share of the US currency’s strongest value in twenty years today.
In the American economy, 315,000 new jobs outside of agriculture were created in August, against the forecast of 300,000. The survey among households showed a better result, when employment increased by 442 thousand. The total non-ekan unemployment rate rose from 3.5% to 3.7%. The reason was the return of people to the labor market (increase of the civilian labor force by 786 thousand), which was reflected in higher participation. Meanwhile, the rate of wage growth again exceeded 5%, but it was not the market estimate.
The return of Amerian to the labor market is a positive first step, which should relieve pressure on wage growth. However, it is necessary for this trend to continue, as even the dog of August dates make the American job market very tense. The number of job vacancies is roughly 11.2 million, with two vacancies for every unemployed American.
The sharp reaction to the data halted the previously intense development, especially of market rates. Both nominal and real inflation rose after the entrance of the Fed officials in Jackson Hole. The lack of data ultimately led to a certain increase in yields of swings, where yields of medium maturities fell the most. Those cannons only dropped a little. Both were about a shift in nominal and real rates. The dollar first weakened above parity, wiping out the losses. Shares in the wild wrote off things not a percent.
The data also contributed to the thorny view of the Fed’s rates. The probability of distribution for naven year by 75 points decreased from about 70% to 60%. In our opinion, this correction does not make sense, since the reported strength did not significantly change the robustness of the American labor market. From the data that will speak to this division, the inflation rate for August will be published five weeks later. Next, let’s focus more on the fact that the Fed will raise interest rates by a quarter of a percentage point. I have to start calling for a slower pace right if they are going to upload data.
In addition, the Fed has increased the pace of quantitative easing to $95 billion per month, including $60 billion in bonds and $35 billion in mortgage-backed securities. Since the bonds will not reach the maturity of the set limit, the Fed will supplement it with a plan to reinvest in treasury bills. We do not assume that this fact should have a significant effect on the short end of the swing arm inputs and probably not even on the volume of the reverse tail.
Fundamental risks are on the side of the stronger dollar, especially against the euro, which is trading below 0.9900 EURUSD this morning. The Fed’s policy will not let up, on the contrary, the question is whether the peak of the annual cycle will eventually stop below/at 4% or you will go. Thanks to the stronger American currency, the European day in the energy sector is also good.
Of late, the euro has weakened in connection with the further stoppage of Russian gas supplies via the Nord Stream 1 gas pipeline. We do not expect that the exchange rate could even move above the parity line in the near future. And that’s despite the fact that the ECB is likely to cut rates this week. Find out more about the ECB in this report.
INSIGHT FOR THE DAY
dDollar is currently traded against the euro in the RoklenFx online exchange at an exchange rate of 0.9899 EURUSD, the dollar index then stands at 110.12 points. During the day, the EURUSD rate should range from 0.9878 to 09956 EURUSD.**
The koruna is currently traded against the euro in the online broker RoklenFx at an exchange rate of 24.55 EURCZK, and against the dollar at an exchange rate of 24.80 USDCZK. According to the prediction, the exchange rate of the euro should be between 24.50 and 24.64 EURCZK, in a pair with the dollar from 24.72 to 24.90 USDCZK.**
**The average nominal exchange rate, published by the ECB, will vary depending on the model with a high probability. Currency exchange rate predictions are based on a time series model that takes into account the previous value of the exchange rate and its past volatility. In order to accurately determine the future volatility, the factor of macroeconomic data disclosure is also incorporated into the model. The model is thus able to determine when the expected and the expected volatility of the exchange rate can be expected.
Disclaimer: This link is only informative and is not recommended as an investment by law. 256/2004 Coll. about companies on the capital market. When compiling this link, the author used publicly available sources. Neither Roklen Holding a.s. nor Roklen360 a.s. are responsible for any errors in the text or data.
Source: RoklenFx, Bloomberg, Reuters, ECB, Fed, NB, COT, TradingView