US Dollar: Strong labour data challenge rate-cut case – MUFG

MUFG’s Michael Wan highlights that stronger-than-expected US labour data have pushed US yields higher and supported the Dollar. Rising job openings and a key 4.6% openings rate level may complicate the Fed’s ability to justify near-term cuts, even with Chair Kevin Warsh’s dovish leanings, as a more divided FOMC may prefer a cautious ‘do no harm’ stance.

Labour data and Fed path for rates

"US labour market data came in stronger than expected, and with that US yields ticked higher while the Dollar was stronger as a result as well."

"In particular April job openings rose to 7.62 million, above the consensus of 6.87 million and the highest since May 2024."

"Nonetheless, what’s interesting is that jobs opening rates rose to 4.6% from 4.2% previously, and Governor Waller has in the past mentioned that jobs openings rate can be a key measure to anticipate tipping points between an acceleration in unemployment rates with 4.6% a key level to watch."

"Overall, it does point to a FOMC and Fed which might find it more difficult to justify rate cuts at least in the near-term, notwithstanding new Fed Chair Kevin Warsh’s proclivity to cut rates and focus on trimmed mean inflation and the productivity impact of AI."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)