During today's Asian trading, the US dollar rose moderately against major currencies, continuing yesterday's rally and reaching its highest level since April 16, while investors await the announcement of the results of the Fed meeting.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.18% to 106.41. Yesterday, the index jumped 0.59% as the latest data strengthened the case for the Fed not to rush to cut interest rates. Data showed that labor costs in the United States rose more than expected in the first quarter, confirming a spike in inflation at the beginning of the year. The employment cost index, the broadest measure of labor costs, rose 1.2% after increasing 0.9% in the fourth quarter. Economists had expected a 1.0% increase/ On an annual basis, labor costs increased by 4.2% after a similar increase in the fourth quarter. The employment cost index is considered by policymakers as one of the best indicators of labor market weakness and a predictor of core inflation, since it takes into account changes in the composition and quality of jobs. The report followed last week's data, which showed an increase in price pressure in the 1st quarter. As for the Fed meeting, economists expect policymakers to leave interest rates in the 5.25%-5.50% range, where it has been since July. Some economists continue to expect that the cost of borrowing may decrease in July, believing that the labor market will noticeably slow down in the coming months. However, market pricing shows a first Fed rate cut is expected in November. According to the CME FedWatch Tool, markets see a 9.5% probability of a 25 basis point rate cut at the Fed meeting in June, a 22.5% probability of a rate cut in July, and a 45.5% probability of monetary policy easing in September.
The pound fell by 0.15% against the US dollar, approaching its lowest level since April 26. Data published by Nationwide Building Society showed that housing prices fell by 0.4% in April, accelerating compared to March (-0.2%), and recording the second monthly decline in a row. Economists had expected prices to rise by 0.2%. In annual terms, house prices rose by 0.6% after an increase of 1.6% in March. This was the third increase in a row. Consensus estimates suggested an increase of 1.2%. The next catalyst for the pound will be the publication of manufacturing PMI for April. Economists expect the index to fall to 48.7 points from 50.3 points in March. A reading below 50 points indicates a contraction in activity in the sector.