Will US jobs pave the way for the Fed to cut?
The Federal Reserve is rushing to announce that it will soon scale back its large-scale stimulus package, and Friday’s jobs report could set the stage for such a move as early as November.
The US central bank has announced that it will buy $ 120 billion worth of treasury bills and mortgage-backed securities each month until it sees “further substantial progress” with two targets: an average of ‘about 2% inflation and a maximum of jobs. low.
Soaring consumer prices have long meant that early targets for those targets have been met, but many Fed officials are ahead of making plans to start cutting or “cutting” support. , suggesting to see a further increase in employment.
Federal Reserve Board Chairman Jay Powell told a recent monetary policy meeting that employment thresholds were “almost met” and saw the September report “knockout, big, super-strong employment “. He said it wasn’t necessary. The test was satisfied. “
Economists polled by Bloomberg expect 488,000 new jobs to be created this month, more than double the surprisingly weak job growth seen in August. Since then, only 235,000 roles have been added. This is significantly less than the million jobs created in June and July, well below the 733,000 jobs expected by economists.
Analysts said the slowing job growth was due to a worsening labor shortage, as well as an increase in Delta cases that have hampered business operations.
Philadelphia Fed Chairman Patrick Harker said at a recent event that “the acquisition of the Fed was necessary for the market to continue to function in the critical stages of the crisis.” But as long as we are still working on the labor problem, the problem is on the supply side, not on the demand side. “
“You cannot go to a restaurant or drive in a shopping district without noticing the sea on the” Help Wanted “sign. Buying an asset doesn’t do much or nothing to improve it, ”says Harker. Colby Smith
Will the pound continue to weaken?
The pound fell to its lowest level this year amid the dollar’s resurgence last week, with investors fearing the UK supply chain crisis could undermine the strength of the country’s economic recovery.
After the Bank of England surprised the market that it might raise interest rates later this year to curb high inflation, it fell despite rising UK government bond yields.
The British pound rebounded slightly from last week’s 2021 low against US $ 1.341 and closed at $ 1.3562.
But the fall of the pound seems to underestimate it, according to Mark McCormick, director of foreign exchange strategy at TD Securities, who is betting on the backlash against the euro.
“Market history loved the pound in the so-called hawkish outlook of the BoE, but hated it when inflation got out of hand,” he said. “The truth is probably somewhere in the middle.”
Some analysts believe the pound’s recovery against the dollar could be difficult. The dollar hit its highest level in over a year against baskets of other currencies last week. This has been spurred on by the prospect of Federal Reserve monetary policy tightening and concerns about global growth, which tend to point investors in a relatively safe direction. The world’s reserve currency.
Jane Foley, Head of Currency Strategy at Rabobank, said: “This requires stronger growth prospects, and at this point management is moving towards weaker data.” Tommy stubington
How are Australian policymakers responding to rising house prices?
When Australia’s central bank meets on Tuesday, it will almost certainly hold interest rates down, and falling iron ore prices and slowing retail sales and employment data will offset the effects of the scorching real estate market.
Shane Oliver, Chief Economist at AMP Capital, said:
At a meeting last month, the Reserve Bank of Australia will cut bond purchases from A $ 5 billion to A $ 4 billion a week, but will schedule until “at least mid-February 2022” in due to “increased uncertainty” due to the epidemic. Announced that it will be extended. From the delta variant of Covid-19.
However, a group of Australian regulators, including the RBA, said last Wednesday that house prices “are still actively rising in most markets” and credit growth remains strong.
Regulators have said that even if lending practices remain “sound”, concerns about credit growth which outweighed rising household incomes “would increase medium-term risks facing the economy.”
In the medium term, Australia’s economic data is expected to “deteriorate” to “reflect the blockade,” according to a Bank of America research report, but “should recover steadily thereafter.”
The RBA has said it will not raise interest rates until inflation is “sustainably” within the target range of 2% to 3%, and this is unlikely. condition is met by 2024.
Oliver said mixed data from the region underlies the scenario. “Falling iron ore prices, weaknesses in China and concerns about the Evergrande group all support the reserve bank’s dovish approach to interest rates,” he said. Anthony clan
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