Dollar increases, stocks decline
Shafaq News / The dollar rallied and a gauge of global equities slid on Thursday after data once again highlighted persistent U.S. labor market strength, suggesting the Federal Reserve will keep interest rates higher for longer to curb inflation.
Fewer-than-expected Americans filed new claims for unemployment benefits last week, the Labor Department said, though the decline was likely exaggerated by difficulties adjusting the data for seasonal patterns.
Claims are well below the 280,000 level that economists have said would signal a significant slowdown in job growth given the relative size of the U.S. labor market.
The dollar index rose 0.58% against a basket of trading currencies, while futures expect the Fed's overnight rate to rise to 5.41% in November and remain close to or above 5% until May 2024.
In contrast the equity market, driven by tumbling headline inflation numbers and hopes of a "soft landing," expects the Fed to hike rates for the last time at the end of a two-day policy meeting on July 26.
The jobless claims report, along with solid retail sales on Tuesday, pushed Treasury yields up on the idea that the Fed will keep rates higher for longer, said Ben Jeffery, a strategist on the U.S. rates team at BMO Capital Markets in New York.
"We still have some probability of another move in September or November," Jeffery said. "That's probably by the Fed's design. To keep financial conditions sufficiently tight to continue fighting inflation, they definitely want to make sure that there are no cuts priced in 2023."
(Reuters)
