All Eyes on US Labor Market (Again)
07 October 2022
It looks like equity indices cannot hold the recent rally as selling prevailed yesterday, mainly due to the hawkish Fed's comments and rising yields.
As of writing, the German DAX index is falling back below the significant support of 12,400 EUR, while US stock indices are down half a percent during the London session.
After suffering recent losses, the dollar index was trading flat at approximately 11 today. The dollar rose Thursday as a result of numerous Federal Reserve officials reiterating their belief that the bank would not soon undertake a dovish swing.
Focus on US jobs market today
Later today, the employment report will be released. According to analysts monitoring it, the economy added 250,000 jobs in October, less than the 315,000 jobs gained in August.
At the same time, the unemployment rate is scheduled to be released, and analysts anticipate that it will remain at 3.7% from the previous month. The Fed's key objective is to slow down the economy without causing significant job losses. In addition, the Fed has noted that there are still many job opportunities.
"Today's data is unlikely to provide any cause for concern (for USD) for now. However, the momentum is likely to have eased a little. Still, the labor market is likely to be sufficiently tight for the Fed to stick to its plan of continuing to hike interest rates significantly." economists at Commerzbank think.
The probability that the Fed will increase interest rates by 75 basis points during its next meeting is presently estimated by traders to be close to 73%. Moreover, the central bank has already hinted that the year would close with US interest rates over 4%, adding to the pressure on risky assets.
Additionally, Canadian labor market data are due today as well, at the same time as the US ones. Therefore, USDCAD will be impacted by both news events.