Markets worldwide have been keenly observing the U.S. macroeconomic announcements. The dollar index has successfully remained above the pivotal 103.20 mark, demonstrating significant strength
The much-anticipated U.S. nonfarm payroll data was a letdown, reporting at 187K. Even though inflation rates showed an uptick from previous readings, they fell slightly short of forecasts at 3.2%. A promising sign was the unemployment rate, which surpassed expectations by dropping to 3.5%. Average hourly earnings were reported at 0.4%, meeting last month’s data and exceeding expectations. A notable 0.7% surge was observed in retail sales, bolstering the dollar index. The ISM manufacturing PMI, at 46.9, showed progress but still missed the mark. The JOLTS reported a decline to 9.582M, lagging behind both anticipations and prior data. While the service PMI managed to stay over the 50 threshold, it disappointed with a score of 52.3. The ISM non-manufacturing PMI came in at 52.7. With inflation on the rise, it’s more likely the Federal Reserve will persist with its rate hikes. This has fortified the dollar against major global currencies and commodities.
EU’s steady course and the UK’s encouraging outlook
The Bank of England marked up its policy rate by 25 basis points, positioning it at 5.25%. Though the U.K. showed optimistic economic indicators, the surging global strength of the dollar triggered a downtrend in the GBPUSD pairing. Failing to hold above the 1.2850 resistance, the pair slipped towards 1.26. In Germany, a key player in the EU’s economic landscape, inflation was reported at 0.3%, aligning with anticipations and prior data. The EU-wide inflation recorded a dip at 5.3%. Pressures on the EUR-USD pair pushed it closer to the 1.08 support, hovering around 1.12.
Asian Central Banks stay on the sidelines
The Reserve Bank of Australia opted to maintain its interest rate at 4.10%, contrary to the projected 25 basis point rise. The Reserve Bank of New Zealand echoed this by holding its rate at 5.50%. Concerning numbers and deflationary threats from China led to market oscillations. China’s trade figures revealed drastic declines, with exports at -14.5% and imports at -12.4%. Inflation figures surpassed forecasts, coming in at -0.3%. The Caixin manufacturing PMI for China signaled a contraction at 49.2.
Bold hike by the Central Bank in Turkey
The Central Bank of the Republic of Turkey (TCMB) took markets by storm, upping its policy rate by a hefty 750 basis points to 25%. This prompted tumultuous activity in the Istanbul Stock Exchange, even as the Turkish Lira gained ground. With the exchange rate previously around 27.50, it sought balance near 25 post-announcement. Inflation reported a yearon- year rise, registering at 47.83%. There was a slight uptick in industrial production to 0.6%. Unemployment ticked up marginally from the prior report, landing at 9.6%. Retail sales took a hit, dropping to 28.5%. The Istanbul Stock Exchange’s activity, fluctuating between the 7800 – 7200 range, garnered attention. Official statements underscored price stability, and hints at concluding the Currency Protected Deposit measures were acknowledged in the market.
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