Despite the more positive than expected weekly data on the US labor market, published on Thursday, the dollar fell again on Friday. According to data released on Thursday by the US Department of Labor, the number of applications for unemployment benefits last week was 547 thousand, which was below the projected 617 thousand.
Although the total number of beneficiaries remained at 3.674 million (the forecast was 3.667 million), indicators show that the number of jobs in the United States may rise sharply in April, by about 1.5 million, according to some economists. According to their estimates, the volume of payments on applications for unemployment benefits for the last few weeks has fallen sharply since mid-March.
According to the official monthly report of the US Department of Labor, published earlier this month, in March the number of jobs increased by 916,000 (against the forecast of +647,000 and the previous value of +468,000), which was the strongest in August 2020. At the same time, the unemployment rate in the United States fell to 6% in March from 6.2% in February.
This is strong evidence of the ongoing recovery of the US labor market and economy, which have been hit hard by the coronavirus pandemic.
The official report for April on the number of non-agricultural jobs in the United States will be published on May 7. Judging by the declining trend in the number of new applications for unemployment benefits, we can expect another strong monthly report on the US labor market. And this will be another strong positive factor for the US stock market and the dollar.
Although it should be noted that the dollar has recently stopped responding strongly to positive macro statistics. Market participants pay more attention to the rhetoric of statements by FRS representatives regarding the prospects of monetary policy.
According to the minutes of the March meeting of the FRS published on April 7, most of the 18 participants in the meeting still expect interest rates to remain at around zero until the end of 2023, also without expressing readiness to buy.
“Participants expect that the recently adopted fiscal stimulus packages, as well as a soft monetary policy, will support consumer spending,” the minutes said, adding that executives did not have time to continue. “Participants felt that the Committee’s current leading indication (on open market operations) regarding federal fund rates and asset purchases benefited the economy.”
“The economic recovery is uneven and far from complete, and the road ahead remains uncertain,” FRS President Jerome Powell told a news conference after the March meeting. “Monetary policy will continue to provide strong support to the economy until its recovery is complete,” he said.
The leaders of the Federal Reserve confirmed this position in subsequent speeches.
Thus, given the declining yield on US government bonds and the soft monetary policy of the Federal Reserve, as well as accelerating inflation and growth of federal debt against the background of a new package of measures to tax and budget stimulus, the value of .
At the time of publication of this article, futures for the DXY dollar index are trading near the mark of 91.04, ending this third week in a row with another decline. At the same time, the yield on 10-year US bonds continues to decline further, which began at the end of last month after reaching a local multi-month high of 1.776%.
At the same time, the main US stock indices remain positive, despite the confusion of some major investors, who estimate the recent proposal of US President Joe Biden to significantly increase the tax on income from income per share i.e. practically twice.
Against the background of concerns about the possibility of a sharp increase in the capital gains tax yesterday, US stock indices fell sharply, and today futures are trading in a narrow range, indicating confusion among investors.
For example, futures on the broad market S&P 500 fell 0.7% yesterday to 4137.0, and today it is trading at the beginning of the European session near 4143.0, remaining largely in the range.
If investors’ fears and confusion about the Biden administration’s new plan to raise taxes on wealthy Americans persist, a period of correction may begin in the US stock market. However, the time of onset of this correction and its duration are not yet clear. In general, the positive dynamics of stock indices against the background of stimulating policies by the FRS and the US government.