Feds Suggest A Slower Path Towards Interest Rate Hikes, Dollar Price Weakens
The dollar began its trade on a weaker note as the Friday trading session began. The Feds recently shared the labor data for the United States, which was not favorable for the interest rate hikes anymore.
February Labor Data
The February labor data for the United States was shared by the Feds on Friday. It showed that wage growth was slower than expected.
After the data was shared, the trading price of the dollar started to experience a downtrend. The data clearly suggested that the inflation rates were weakening.
For almost an entire year, the rising inflation rates continued pressurizing the entire US economy. The Feds had to come up with an interest rates hike policy to deal with the situation.
Since then, the Feds have continued fighting the inflation rates aggressively with aim of bringing the inflation rates lower.
After a long-running struggle, the inflation rates have finally started moving lower. With the inflation rates easing, the Feds no longer have a reason to keep up with their current monetary policy.
With the inflation rates moving downward, keeping up with the interest rate hikes does not seem to be a logical option. The Feds will need to tone down on the interest rates, which means that the dollar price will experience a downtrend.
This is eventually going to reduce the demand and appeal of the dollar in the market. This is the reason why the value of the dollar is now edging lower.
The latest jobs report shows that the US economy has witnessed a sudden pump in jobs for the month of February.
With the jobs rising in February, it was expected that the wages would surge as well. However, a slow growth rate has been witnessed in wages.
On top of that, the unemployment rate also surged in the same month. Prior to the release of the data, the markets had expected that the interest rates would be surged by 50 bps.
However, as the data shows that the inflation rates are moving downward, the Feds may not implement the interest rates. The traders are now losing their confidence, which has brought the dollar price lower.
In the upcoming weeks, the Feds may announce further leniencies in the interest rate hikes. This would continue pulling the dollar price lower.
Jerome Powell was Hawkish
Initially, the traders were glad that the interest rates would continue hiking based on the approach of the Fed Chairman. They were hoping that Jerome Powell will announce the implementation of interest rate hikes.
This is the reason why the dollar price continued surging. However, the situation turned sideways as the Feds’ approach seems to have changed following the recent updates.
Therefore, the traders have lost their confidence and are leaning backward. They are not supporting the dollar price with the same level of determination as they did in the past.
The demise of the Dollar against the Major Currencies
The forex data suggests that the performance of the dollar has plummeted against all major currencies. Although the dollar kept moving lower against the major currencies, it remained flat against the Canadian dollar.
The dollar index has also fallen significantly in the latest trading session. The forex market report has revealed that the DXY has fallen by 0.618% in the recent session.
As for the euro price, it has also experienced a significant surge against the dollar. The euro price has experienced a 0.57% surge against the dollar. It is currently trading at a high of $1.064 against the dollar.
The sterling price has also experienced a significant surge against the dollar. Its value has also surged significantly against the dollar by 0.83%, moving up to $1.2024.
After experiencing a pull against the dollar, the Japanese yen has also experienced a surge against the dollar. The value of the yen has reportedly surged by 1.01% against the dollar price.