A surprise rise in US job openings in April and statements from Federal Reserve (Fed) officials caused bets on further interest hikes to fall to 30%.
On Wednesday, US stock indices declined as unexpectedly positive labor market data increased expectations for another interest rate hike from the Fed.
US job postings surprisingly increased in April, according to the Job Vacancy Survey (JOLTS) data from the Labor Department, signaling sustained strength in the labor market.
Following the release of the data, the futures market priced in a roughly 70% likelihood of a 25-basis point increase at the June 13–14 Fed meeting, up from just over 60% on the day.
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However, things changed during the session when two Fed officials mentioned that there may be a pause in rate hikes in June so they can monitor the state of the labor market and inflation.
Even with these statements, some analysts believe that inflation is still a critical issue, and that the Fed has not yet completed its mission to bring it under control.
The Fed's Beige Book, which was later published, reported a small fall in economic activity, a moderating of the labor market, and expressed concern about deteriorating financial sector conditions.
This was sufficient, along with remarks made by Fed officials, to cause betting on an additional interest rate hike to drop as low as 30%.
All-in-all it was a session marked by ups and downs, divergent viewpoints, and a market dominated by uncertainty.
Although there are some unknown factors, it is assumed that Congress will approve the agreement on the debt ceiling. In no way, however, did this seem to affect the market.
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The North American indices somewhat made up for the session's lost ground but without demonstrating any upward momentum, while waiting for the employment statistics and the ADP employment report that will be released today, and the non-farm payrolls tomorrow.
From this point forward, the market will fluctuate in line with predictions of the Fed's future moves, which will be based on this week's employment data and next week's inflation data.
The US dollar strengthened in the early part of the session on expectations of more interest rate hikes by the Fed but subsequently this increase stalled when market sentiment changed.
Technically EUR/USD trades between the 100 and 200 day exponential moving averages, which serve as support, and has a daily RSI bordering on the oversold zone.
Sources: Bloomberg, Reuters