US dollar rate, chart, and analysis
- The US debt ceiling is approved and passes to President Biden for signature.
- The US jobs market remains hot – and next comes the closely watched Non-Farm Payrolls report.
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The US debt ceiling agreement has passed through Congress and now only needs President Joe Biden’s signature to take effect, just two days before the US government is expected to run out of money. Today’s agreement suspends the debt ceiling until January 1, 2025 and should save about $1.5 trillion over the next ten years. Several weeks of controversy over that debt ceiling sent short-term US yields sharply higher as investors priced in the very slim possibility of a default in the US. With those concerns now in the rearview mirror, the pressure on those returns will be removed.
The US job market remains strong as companies are still struggling to hire workers despite the slowing US economy. This week’s labor reports confirm Fed Chair Powell’s view that the jobs market remains “very tight” with the JOLTS and ADP indices released this week beating the market consensus.
The latest US Jobs Report (NFP) will be on screens later today and will be closely analyzed for any further evidence of labor market tightness. While the overall total over the past year was lower, apart from two out months, the April report showed a slight uptick while the unemployment rate remained near a multi-decade low. Today’s report is expected to show that 190,000 new jobs were added in May, although market consensus has proven to be consistently low over the past year. Traders should also be aware of any market revisions on the headline number and average hourly earnings data.
The US dollar continues to slide as the move gains additional impetus from recent comments by two voting Fed members, Harker and Jefferson, who said the Fed may keep interest rates on hold at this month’s FOMC meeting. Prior to these comments, the market was putting a lid on the roughly 65% chance of a 25bp rate hike on June 14th. That probability has now dropped to just 27% with a 73% chance that the Fed will not raise interest rates.
The US dollar’s one-month rally appears to be over as the greenback has now touched lows last seen a week ago. The technical outlook remains mixed with the 200-dma and former resistance level capping any move higher, while the 20- and 50-days are likely to offer support. Today’s NFP report may well move the US dollar but further moves, including any potential resistance and support break, will be dictated by the June FOMC meeting.
USD Daily Rate Chart – Jun 2, 2023
Chart via TradingView
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