The Euro surged higher in yesterday’s trading session as the U.S. dollar tumbled against all the other major currencies on and Treasury yields extended their retreat after data showed that job openings in the US fell in July and that consumer sentiment deteriorated during August.
U.S. job openings dropped to the lowest level since March 2021 and added further evidence of a major slowdown in the US jobs market.
At the same time, the Conference Board consumer confidence index slid as well, suggesting that consumers are becoming more cautious, due to aggressive interest rate hikes and may give an indication that inflation is finally being brought under control
The data prompted investors to have second thoughts on whether another hike by the Fed is appropriate and this is evident by the lowering of the market’s implied rate path.
The probability of another quarter-point increase by November has slid to around 50% from 65%, while the basis points worth of rate reductions anticipated for next year have increased to 100 from around 90.
Traders however, should be cautious because despite the lower than expected employment figures, yesterday’s job openings report pointed to still tight labour market conditions, with 1.51 vacancies for every unemployed person, slightly below June’s 1.54, but well above the 1.0-1.2 range that is considered consistent with a labour market that is not generating too much inflation.
We may have to wait until Friday for the release of the Non-Farm Payrolls report from the US which is a much bigger indicator on the state of the US employment market and if the figure comes in above expectations, the Euro will likely suffer.