Today’s Spotlight Market
The Dollar Index is slightly lower to start the week due to uncertainty over Fed interest rate policy for the remainder of the year. Goldman Sachs raised its forecast for a December rate increase to 55% after last Friday?s non-farm payrolls report. Morgan Stanley and other large banks have a more tepid outlook, expecting the Fed to stay put on interest rates through the end of the year. The chance of a September rate increase went up, according to Fed Fund futures, after Fed Chair Janet Yellen?s speech in Jackson Hole. However, the odds still heavily favor rates staying steady.
Fundamentals
Last Friday?s non-farm payrolls missed expectations, as the economy only added 151,000 jobs in August. Traders had been looking for an increase of 180,000 jobs. While the figure looks bad on the surface, the shortfall was largely offset by the upward revision of the July figure from 255,000 to 275,000. Traders were a bit concerned by the average workweek falling from 34.4 to 34.3. The nonfarm payrolls report was largely seen as neutral for the Dollar Index. The odds of a rate hike have not changed much and Fed Fund futures are pricing in a 21% and 53% chance of a rate hike in September and December, respectively. The Fed had seemed prepared to raise rates in Jun or July, but the Brexit vote threw a monkey wrench into the central bank?s plan. Softening economic data and lackluster job figures have made it difficult for the FOMC to justify a rate increase at this time. Inflation remains in control and there may be some concern among Committee members that a rate increase could put further deflationary pressure on the economy.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the cash Dollar Index (DXY) mired in range-bound trading. It seemed as though prices would be able to break through near-term resistance around the 96.00 level. The RSI indicator is still showing overbought levels, which could put pressure on prices in the near-term.
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