US economic worries quickly turn into global economic worries | Forexlive
The market is struggling with how to interpret this week’s deterioration in JOLTS, ADP employment and the ISM services data. Some modest weakness is bad news for the dollar as it would confirm a lower Fed funds path but the speed of the decline indicates a hard landing is possible. And if the US is headed for a hard landing, the market is saying that it will be worse elsewhere.
With that, the US dollar is rallying on risk aversion as we quickly pile into the other side of the ‘dollar smile‘.
EUR/USD is now down 40 pips to 1.0910 and cable down a half-cent to 1.2449.
It’s tough to separate the signal from the noise here. US yields are lower again today with 10s down 5.8 bps to 3.28% to take out the bottom of the bank-rout lows. It’s worth wondering if we could see a 2-handle soon.
What the market is worried about is that the Fed won’t cut in time to save the economy and there’s good reason behind that belief, with a multitude of FOMC policymakers saying they will hold rates for a long period.
What I’m thinking about though is weather the latest economic weakness simply reflects concern around the bank rout and if that’s only temporary. Against that, the excess pandemic savings will run out sometime soon and certainly before year end.