U.S. dollar company as a member of the Fed talks about austerity Reuters

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© Reuters. File photo: A pile of former U.S. President Abraham Lincoln was seen on five-dollar banknotes at the Bureau of Engraving and Printing in Washington on March 26, 2015. REUTERS/Gary Cameron

Author: Wayne Cole

SYDNEY (Reuters)-The U.S. dollar is expected to rise on Thursday, as the Fed’s tough remarks led the market to advance the timing of tightening policy ahead of schedule, while the prospects for action in Europe and Japan are still far off.

The euro fell to 1.1837 US dollars against the US dollar, rebounded from the high of 1.1899 US dollars overnight and failed to break the resistance near 1.1910 US dollars again.

The U.S. dollar also rebounded from Wednesday’s low of 108.71 to 109.51, offsetting the downward bearish breakout.

Fed Vice Chairman Richard Clarida indicated that the conditions for a rate hike may be met by the end of 2022, laying the foundation for a rate hike in early 2023.

He and three other Fed members also stated that they will reduce bond purchases later this year or early next year based on the performance of the labor market in the coming months.

NatWest Markets analyst Brian Daingerfield (Brian Daingerfield) said: “This reflects the Committee’s tough attitude towards the risk of continued inflation and what it might mean to achieve the Fed’s new inflation framework.”

“This means that the risk of employment on Friday and subsequent employment is high.”

With the spread of Delta variables and labor bottlenecks disrupting the market, confidently predicting employment reports remains particularly tricky.

Therefore, although the median employment forecast is 870,000, the estimate ranges from 350,000 to 1.6 million.

The data released on Wednesday was mixed. Among them, the ADP private recruitment report was unexpectedly weak and conflicted with the strongest data in the history of the US service industry.

Clarida’s remarks led investors to slightly increase the possibility of interest rate hikes at the end of 2022/early 2023, and as short-term yields rose, the U.S. Treasury yield curve flattened out.

This move may occur before the European Central Bank takes any austerity measures, which is still working hard to bring inflation close to its target.

In contrast, the Bank of England is closer to downsizing and may expand at its policy meeting later on Thursday.

This outlook helped the pound rebound at the beginning of the year, even though it has largely traded sideways in the past few months. It was finally located near the support level of 1.3884 and failed to break the resistance level above 1.3980 many times.

Compared with the Reserve Bank of New Zealand (RBNZ), all these central banks are lagging behind, which seems likely to raise interest rates at the next policy meeting on August 18, making it the first developed country to take action since the pandemic Central bank.

The super-employment report released on Wednesday only added to the reason for New Zealand’s austerity policy, which soared to a one-month high of US$0.7088 overnight, and then stabilized at US$0.7041.

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