Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
CHIA SẺ
The past two days did a commendable job of showcasing just how resilient the US economy is proving to be. On Wednesday, the latest PCE price index made it clear that inflation was not as troublesome as analysts had previously assumed, as the published figures fell below estimates across the board. Moreover, the Bureau of Economic Analysis also revised prior periods significantly to the downside, shaving 30-bps off the July estimate and lowering the Q1 headline figure from 4.4% to 3.9%. Adding fuel to the fire, huge revisions to US GDP data were released on the same day, bumping Q1 growth estimates from 2.1% to 2.5% and promoting Q2 figures from 1.5% to 2.2% annualised. The double whammy of lower inflation and higher growth would have been surprising enough on its own, but the good news did not stop there. Yesterday, the latest jobless claims revealed a surprise drop to 197 thousand, fewer than the previous week and beating forecasts of 200k, while continuing jobless claims fell to 1.701 million – the lowest level since April 2023.
All the above to say that the US economy is running hot. The continued strength means that the Federal Reserve will almost certainly raise interest rates on the dollar over the coming months and well into 2027. While any action remains unlikely in October, the subsequent FOMC meeting on the 9th of December is now heavily leaning towards at least a 25-bps hike. Further out, the implied odds for the end of 2027 are eyeing rates of up to 4.75-5.00% compared to 3.75% today.
The shift in expectations has provoked the dollar into a full-on rampage, pushing the DXY over 102 points to its highest level in the last 18 months. The surge in the greenback relentlessly punished the euro yesterday, which fell the better part of 0.8% against the dollar to a daily close of $1.124. The pound fared little better, crumbling 0.5% to $1.32. The yen was unable to mount much of a defence either, falling to 158 per USD. US Treasuries experienced a rapid sell-off on Thursday, spiking yields on the 10-year note to 5.34%, although sellers eventually tired themselves out and yields fell back to 5.24% by the end of the day.
For all the drama unfolding so far this week, the story is far from over. Non-farm payrolls are just around the corner, and if the ADP employment change and jobless claims are anything to go by, markets could be in for another shock. Forecasts currently stand at 90k new jobs in September, with U-3 and U-6 unemployment rates of 4.1% and 7.7% respectively. Another potential firework display in the making.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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