The US dollar has fallen hard across the board with USD/JPY erasing the entirety of today's earlier move. That comes after a pair of big economic data misses.
JOLTS job openings plunged to the lowest since March 2021 and the three-month decline of 2.55 million job openings is the largest on record. Meanwhile, US consumer confidence sank to 106.1 from 117.0; it was expected to tick slightly lower to 116.0.
This could be the start of a relatively quick decline in economic data as pent-up savings from the pandemic run out at the same time that high interest rates sap the consumer. Annecdotes from multiple retailers this earnings season suggest a pronounced slowdown from consumers in June and beyond. Some of that is a shift to services spending but I suspect that will slow in the weeks ahead as consumers are hit by higher gasoline prices. Moreover, Americans are also about to be hit by student debt repayments in October.
Last week, Powell suggested proceeding cautiously on rates and that will mean no hike in September. The market is only pricing in a 13% chance of a hike anyway. The following meeting isn't until Nov 1 and by then the weight of evidence will make it clear that hikes are no longer needed.
US 2-year yields may have just stamped a triple top as the next big debate will be when the Fed will start cutting. For now, the market is eyeing May and June 2024.
