US stocks are drifting further to the downside. Yields are moving higher and the US dollar is moving higher after the FOMC Meeting Minutes.
The job market remains tight, but there are signs of some slowing:
- Labor market conditions remain tight, with strong payroll gains and low unemployment.
- Some indications noted that supply and demand in the labor market are in a better balance.
- Expectations are that employment growth may slow further, in line with expectations of economic growth below the general trend.
- Nominal wage growth is showing signs of abating, but is still running at a higher pace than it could be sustained in the long run with the committee’s inflation target of 2 per cent.
Unacceptably high inflation:
- Inflation is seen as unacceptably high.
- The decline in inflation was slower than expected.
- Commodity inflation slowed but slowed less quickly than expected despite the easing of supply chain constraints.
- Some respondents noted a recent moderation in housing inflation and expected this trend to continue. However, some pointed to upside risks in the same outlook.
Monetary policy remains cautious:
- There is a high degree of uncertainty regarding the cumulative effects of monetary policy tightening that has already been enacted and the possibility of further tightening.
- Downside risks to economic activity and inflation include the possibility that tightening of credit conditions and monetary policy will affect economic activity more than expected.
- Some respondents point to the risk that long-term inflation expectations could become unconstrained by stronger-than-expected consumer demand and a tightening labor market.
- Almost all respondents saw fit to maintain the target range for the federal funds rate, given the significant cumulative tightening in monetary policy and the delays with which policy affects economic activity and inflation.
A stock market snapshot shows the following:
- Dow Industrial Average -154.0-0.45% at 34,264.21. The lowest level during the day was 34226.98
- S&P -13.63 points or -0.31% at 4442. Today’s low reached 4436.61.
- NASDAQ – 41.0 points, or -0.30%, at 13776. The lowest reached 13764.25
Looking at the US debt market, the longer it is and the more it moves.
- 2 years yield 4.942% +0.2 basis points
- 5-year yield of 4.245%, +5.9 basis points
- 10-year yield of 3.937%, +7.9 basis points
- 30-year yield of 3.943%, +6.6 basis points
Price action in some major currency pairs:
- EURUSD: EURUSD moved to a fresh session low at 1.08522. The price fell earlier today below the 38.2% retracement level at 1.08673. The next target comes against the swing zone between 1.0842 and 1.0848. Below that and traders will start looking towards the 100 day and 50% retracement both around 1.0823 (see posts here)
EURUSD moves to a new low minutes later
- GBPUSD: GBPUSD fell to test the 200 hour moving average at 1.2891 (price is trading at 1.2693). And below that, there is a rally in the 100 hourly moving average at 1.26836. The pair is also in a swing zone between 1.2681 and 1.26988. The low for the day extended from earlier today to 1.2687. On dips, the price broke below the 200 hourly moving average but failed. Subsequent move higher was halted before swing zone drop near 1.27384 (price high reached 1.27347). Now, a move below the two hourly moving averages at 1.2691 & 1.26836 will increase the bearish bias. The 38.2% move up comes from the May low at 1.2413 and would expect more bearish momentum.
GBPUSD is retesting the 200 hourly moving average (100 hourly moving average is below it).