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Analysis

USD is knocked out. Overview for 05.12.2022

The market major began the week by growth. The current quote is 1.0540.

The US dollar got trapped by market inferences and previous comments of the Fed’s head Jerome Powell. First, Powell allowed for a more loyal attitude to the interest rate …

The market major began the week by growth. The current quote is 1.0540.

The US dollar got trapped by market inferences and previous comments of the Fed’s head Jerome Powell. First, Powell allowed for a more loyal attitude to the interest rate at the December meeting, and then investors came to their own conclusions based on employment market statistics. According to the CME, the probability of the growth of the interest rate by 50 base points at the meeting on 13-14 December is no less than 75%.

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Now investors are busy calculating, where is the top limit of the rate. At which level will the Fed pause and start cutting down on the rate? Some say this level is 5.25%. This means that interest rate has a long way to go.

The employment statistics in the US in December turned out strong. The unemployment rate remained at 3.7%. However, the NFP grew by 263 thousand, exceeding expectations, while the average hourly wage grew by 0.6% m/m instead of 0.3% m/m forecast.

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Companies have increased the wage fund, which means they feel good and ready for a lengthy period of growing interest rates.

It should be realized that everything going on now is a game at the limits of the economy. Businesses cannot shut down just like this, and the system cannot lose all those workplaces and taxes. Everyone is looking for some balance that might be hiding in the constantly growing inflation. And here, the USD will be good.

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