Can Employment Data Embarks Resurgence In Dollar Upward Momentum?March 10, 2023
The U.S. Department of Labor is all set to release the highly anticipated employment report on Friday.
The stake of this report are immensely high and it will have large and very decisive implications across a range of industries.
In addition to that, The United States Federal Reserve’s Chairman Jerome Powell in his recent speech to U.S Congress said that he and his team are waiting for non-farm payrolls.
The Feds also stated that their decision to increase the policy rate will heavily be reliant on the employment ratio. In case of unemployment peaks, the Feds will have no other option, but to spike up the interest rate.
A higher policy rate will send the dollar price upward and a strong dollar will put pressure on both; the commodities market and the stocks market.
Various studies are pointing out that the labor market will experience another robust month.
But the chances are significantly high that February’s employment numbers will not be able to beat the remarkable numbers of the previous month.
The dollar appears to have a promising future in a situation where the Federal Reserve is fixated on maintaining elevated interest rates.
The insecurities in the stock market are further strengthening the U.S. dollar at the very moment.
Economic Outcomes Hold the Integral Importance
The main focus in the markets this year has been on the robustness of the United States economy.
Despite the Federal Reserve’s quick rate hikes to control inflation, current data indicates that the economy is performing well in most areas. So far, things are going in a positive direction for the U.S. economy.
The reason is simple, as the thing stands three core economic indicators including inflation woes, market demand, and labor market have not harmed economic growth.
The market has undergone a significant reevaluation due to its ability to withstand economic challenges.
Hence, this has forced the Feds to crank up the interest rates.
Feds are likely to increase the interest rate on March 22nd for an extended period to cope with the fears of inflation.
High-interest rate means a high price of USD. Higher interest rates for a longer time mean the USD price will remain higher for a longer period.
Dollar Investors Are Dreaming About Better Times
Despite the negative reaction on Friday, the overall prospects for the dollar appear promising. In simple words, the United States is in a comparatively better economic position than other significant economies.
This allows the Feds to increase interest rates to a greater extent and for an extended period compared to other central banks. This promising economic recovery of the U.S. economy is directly linked to the country’s loan market.
The increase in rates has not had a direct impact on current homeowners as the majority of mortgages in the United States are based on a fixed 30-year term.
It takes a while for higher interest rates to have a significant impact on economic activity since they only affect the future homebuyer.
In simple wording, if you have recently purchased the home on the mortgage at the current interest rate, your interest rate would be locked for the coming 30 years.
This means the high-interest rate will have no impact whatsoever on your monthly repayments.
Conversely, if you decide that you will file for a mortgage application after 22nd March and Feds increased the interest rate, then you have to obtain a loan on a newly adjusted interest rate.
This means you will be paying higher interest on your mortgage policy for the next 30 years. Hence, the Feds are confident that increasing the interest rate will have no impact on U.S. consumers.
In addition to that, further increases in interest rates will give U.S. dollar the momentum against the basket of six other prominent currencies.
A stronger U.S. dollar will play a significant part in streamlining the country’s import and export practices as well.