BUZZ-COMMENT-US recap: EUR/USD buoyant as JOLTS, ADP miss forecast

Credit: REUTERS/DADO RUVIC

March 6 (Reuters) - The USD index traded down 0.46% in NorAm afternoon, weighed down by below forecast February ADP and JOLTS data, which hint that prior Fed hikes are working through the economy and potentially increasing the possibility of returning U.S. inflation to the Fed’s 2% inflation target.

Adding to the dollar slide were slightly dovish comments by Fed Chair Jerome policy at his semi-annual monetary policy testimony before the House Financial Services Committee.

Though Powell acknowledged the strength of the U.S. economy and noted the risk of cutting rates too early and too fast as well as too late or too little, markets focused on his observations about inflation’s progress toward 2% and that it will likely be appropriate to begin dialing back restraint at some point this year.

The dovish nod to later in the year comments pushed U.S. Treasury yields lower and increased the 2024 rate cut expectations in 2024, weighing broadly on the dollar.

EUR/USD was up 0.42% in NorAm afternoon trade as U.S. yield differentials narrowed with European bonds. The rise above the upper 30-day Bolli provided fodder for bulls to add to EUR long positions, which had been declining since the beginning of 2024 as Fed rate cut expectations declined considerably.

USD/JPY slid to a session low at 149.09 while Powell testified, trading down 0.5% at 149.27 nearing the NorAm close.

The yen benefited from lower Fed rate expectations and talk the BoJ may move, at the March or April rate meeting, to normalize rates, which is narrowing U.S.-Japan rate spreads and prodding extremely long USD/JPY positions to unwind ahead of the March 19 BoJ meeting.

GBP/USD moved to a session high 1.2762, distancing itself from current daily cloud top support at 1.2709 as UK rate expectations are expected to remain at a premium to U.S. rates. Sterling traders are eying the Feb. 2 high at 1.2772 and the Jan. 11 2024 high at 1.2785 as the BoE is expected to keep rates high for longer, and begin its rate pivot lower after the Fed. Traders awaiting Friday’s payrolls data and U.S. and UK CPI on March 12 and 20 respectively.

AUD/USD rallied more than 1% to 0.6576 as the dovish Fed lean boosted growth expectations with oil and copper rallying.

Bitcoin resumed its climb rising 5.8% to $67k, a touch below Tuesday’s all-time-high just above $69 as the ETF-related bid and lower interest rates continue to underpin BTC. Gold rallied 1% to $2,150 a new all-time-high of its own as lower rates stirred bids.

For more click on FXBUZ

(Editing by Burton Frierson Paul Spirgel is a Reuters market analyst. The views expressed are his own.)

((paul.spirgel@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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