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Positive news from the U.S. labor market has raised fears of further FED rate hikes this year

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fed rate hikes this year

FED rate hikes and inflation this year are at record highs. The U.S. jobs data released on Friday were truly unexpected by market participants, which had andwill still have consequences.

According to the July report on new jobs and total unemployment, the U.S. economy gained 528,000 jobs against a forecast of 250,000, and more importantly, the June numbers were also revised upward to 398,000. 

The unemployment rate fell to 3.5% from 3.6%, which was also a surprise since it had been expected to remain at 3.6%. Another positive piece of news was the average hourly earnings up 0.5% month-over-month and 5.2% year-over-year. Also, upward revisions were made to this indicator for the previous period under review.

Why did the overall previously positive sentiment in the markets change so drastically? It is connected with the fact that earlier the data showing the slowdown of the number of new jobs in the USA might have become the reason for the Federal Reserve’s decision to pause in raising interest rates in August, and in September to continue the cycle with a noticeably lower growth rate, for example at 0.25% per month. 

Here the main reason for such a scenario was the situation in the labor market. The Fed has an opportunity to continue the sharp FED rate hikes this year, not just to limit the growth of inflation, but to make it go backwards.

Such a change in sentiment could put pressure on demand for stocks of companies, which always have trouble growing if the Central Bank conducts aggressive interest rate hikes. But in this case, the dollar would be supported.

There is also a possibility that the Fed may not change its plans to relieve pressure by raising rates, assessing the current situation in the economy as positive and the inflation rate as the maximum, which may stop and go in the opposite direction in the near foreseeable future, and without continuing aggressive rate increases.




Forex

The dollar is down again against major world currencies

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the dollar is down again

The dollar is down again against the euro, the pound, and the yen, according to trading data.

The euro rose to $0.9913 from the previous close of $0.9882, the pound to dollar rose to $1.1357 from $1.1326;, and the dollar to yen fell to 144.56 yen from 144.63 yen. The dollar index (the exchange rate against a basket of currencies from six U.S. trading partners) was up 0.77 percent, to 110.92 points.

Why is the value of the dollar going down?

Investors will look forward to macrostatistical data on the U.S. labor market on Thursday and Friday. Later in trading will be the nation’s initial jobless claims for the week through October 1. Experts predict the index will increase by 10 thousand up to 203 thousand compared to the previous week.

Friday will release important statistics on unemployment in the USA. Analysts believe the rate in September remained at the August level of 3.7%, while the number of those employed in non-farm industries increased by 250,000.

Unemployment data is an important indicator for the U.S. Federal Reserve (Fed) in making rate decisions. The regulator has repeatedly stated its willingness to fight high inflation, since the beginning of the year, the key rate has been raised five times; in November, the markets expect another increase. According to the CME Group, 66% of analysts are predicting another 75 basis point increase to 3.75-4%, while the remaining 34% are predicting a 50 basis point increase.

Earlier we talked about Copper and Zinc rising in price after new LME restrictions; and Aluminum exceeding $2,400 a ton.

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Forex

Base metals prices today rising after new LME restrictions, aluminum exceeds $2,400 a ton

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base metals prices today

Base metals prices are rising today. Copper and zinc prices rose sharply after the London Metal Exchange announced on Thursday new restrictions on shipments from UMMC facilities. Aluminum prices have climbed by 2.5% to above $2,400 per ton for the first time since August 30, according to market data.

Base metals market

December futures on copper on the Comex exchange rose 0.95% to $3.5767 a pound (about 0.45 kilograms) at 10.20 am, while the maximum price was $3.5922. Zinc futures rose 3.7% to $3,156.5 per ton, compared with a daily high of $3,192.5.

Aluminum futures were up 1.68% to $2,391.5 per ton by this time and were already up to $2,419. Aluminum has been rising in price since late last week after reports surfaced that the LME is considering possible bans on new shipments of Russian metal to its warehouses.

At the end of Wednesday’s trading on the LME, the price per ton of copper with delivery in three months was down 0.5% to $7,679.5. Aluminum was up 0.17% to $2,352 and zinc was down 0.1% to $3,044.

Earlier we talked about gold prices surpassing $1,700 an ounce.

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Current gold prices combined above $1,700 an ounce

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current gold prices

Current gold prices rose on Tuesday morning; the price was above $1,700 dollars per troy ounce, according to trading data.

The price of December gold futures on the New York Comex Exchange rose by $6.85, or 0.4%, to $1,708.85 per troy ounce. December silver futures rose 1.53% to $20,905 per ounce.

Daily gold prices were supported by a decline in yields on U.S. government bonds. Thus, the yield on ten-year government bonds (U.S. Treasuries) fell to 3.615% from the previous close of 3.651%, while at the beginning of Monday’s trading the indicator exceeded 3.8%.

U.S. Treasuries are an alternative investment to gold, which is why their quotes tend to move in different directions. As a result, gold gained 2.3% on Monday, from $1,670 to $1,710.

Earlier, we reported that oil rises in anticipation of possible OPEC+ production cuts.

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