Strongest Nonfarm Payrolls in 10 months sends US interest rates higher
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In another robust display of economic health, the US Nonfarm Payroll figures for March exceeded expectations, with 303k jobs added compared to the anticipated 200k. This significant jump marks the strongest employment growth in the past 10 months, offering a positive signal for the US economy. Such data points are critical for forex traders as they indicate potential shifts in fiscal policy and economic momentum.
US Treasury yields near year-to-date highs
US 10-Year Treasury yields are hovering near their highest levels since November 2023, reflecting investor confidence and expectations of economic stability. Higher yields often suggest a stronger dollar as they attract investors looking for secure returns, impacting currency valuations and forex trading strategies.
Fed could cut interest rates less than expected
Continued strong US data and rising yields are causing a decreasing likelihood of the Federal Reserve cutting interest rates to below 4% in 2024. Futures traders at the CME were anticipating a 50% chance of sub-4% rates by December when the year began – now those probabilities have fallen to 0%. This change in market sentiment signals a reassessment of economic conditions potentially influencing USD strength and forex market dynamics.
Growing chance of no interest rate cuts in 2024
Fed Funds futures now show a 2.0% probability of interest rates ending the year unchanged at 5.25-5.5%. While seemingly insignificant, this percentage has grown from 0% at the start of the year, and the most likely number of 25bps cuts has shifted from 6-7 to now only 2-3. This evolving perspective hints at a stable, perhaps even robust, economic outlook for the near term, reshaping forex strategies as traders consider the implications of sustained rates on currency values and exchange rates.
US dollar trading near highs in several forex pairs
The US dollar is demonstrating its resilience, trading within 100 pips of its year-to-date highs against major currencies such as the EUR, GBP, CHF, and JPY. This position underscores the USD’s dominance in the forex market, influenced by factors like treasury yields and interest rate expectations, and bolstered by the recent employment data.
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