Staying alert to US labour market weakness – DBS

The DXY Index depreciated by 0.3% to 98.1. Mirroring the nonfarm payrolls, US JOLTS job openings fell to 7181k in July, lower than the 7380k consensus. June was revised lower to 7357k from 7437k,, DBS' Senior FX Strategist Philip Wee report.

US labour market and Fed watch

"The labour market’s softness was also reflected in the Fed’s Beige Book, which reported little or no change in economic activity across most of the 12 Fed districts. Business contacts reported raising prices to partially offset the impactful tariff-related price increases in inputs. Many households felt the pinch of wages not keeping up with rising prices, implying weaker consumer spending and lower growth expectations. Hiring slowed with businesses hesitant to refill vacancies or bring new staff, with some turning to automation and AI instead."

"Overall, the Beige Book suggested that the anticipated 25 bps cut at the September 17 FOMC meeting could be the start of a sustained easing cycle. To cement this expectation, Friday’s August US monthly jobs report will need nonfarm payrolls to remain below 100k and the unemployment rate to rise above 4.2% for the first time since October 2021. Today, consensus expects ADP Employment to decline to 68k in August from 104k in July. Initial jobless claims could trend higher if its 4-week moving average increases a fourth week in the final week of August. The ISM Services PMI Survey will be monitored to see on whether it will mirror its manufacturing counterpart in reporting weaker prices paid and employment sub-indices."

"Today, the Senate Banking Committee will hold a confirmation hearing for Stephen Miran to replace Adriana Kugler as Fed Governor. There is a strong likelihood for Miran to be confirmed in time for the September FOMC meeting. US Treasury Scott Bessent is set to begin interviewing candidates for the Fed Chair starting September 5, with the process expected to carry through next week. Miran and Bessent have been building the narrative of upholding the Fed’s independence while faulting Fed Chair Jerome Powell’s leadership for misjudging inflation and labour dynamics. The fact remains that both Miran and Bessent, co-authors of the Mar-a-Lago blueprint, have a vision of lower rates and currency adjustments, in addition to tariffs, as essential for correcting US trade imbalances."