US Dollar Traders Lock Gaze on NFP Report
XM Group | Jun 04, 2024 04:17AM ET
- Fed sticks to ‘higher for longer’ mentality
- PMIs pose downside risks to nonfarm payrolls
- But point to sticky wage growth
- The data comes out on Friday, at 12:30 GMT US inflation slows but Fed signals patience
Although the latest CPI data revealed that inflation in the US has resumed its downtrend, Fed officials have been continuously signaling patience about when they may start lowering interest rates, with some of the ultra-hawks, like Minneapolis Fed President Neel Kashkari, even leaving the door open to the possibility of resuming rate hikes.
That said, Kashkari is not a voting member this year and thus, given that most of the rate setters have been abiding by just a ‘higher for longer’ mantra, investors have scaled back their rate cut bets to the extent where only 40bps worth of reductions are expected by the end of the year, with the probability for a first quarter-point cut being delivered in September now resting at around 70%.
If the bulls are willing to charge again, they may test the 1.3735 area again soon, the break of which could signal the resumption of the prevailing uptrend. The first line of bear-defense may be at around 1.3785, with the next resistance marked by the high of April 16, at around 1.3845. For the picture to darken, the pair may need to drop below the crossroads of the 1.3600 zone and the aforementioned uptrend line.
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