The US economy stalls, the Fed can lower its interest rates

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With a number of indicators below expectations, the US economy comes to a standstill, which reinforces hopes for an upcoming interest rate cut from the US central bank (Fed).

The dollar lost ground on Wednesday, July 3, undermined by a number of below-expected indicators, boosting hopes of an upcoming interest rate cut by the US Federal Reserve (Fed). Around. At 20:15 GMT, the dollar returned 0.37% to the single currency at $1.0786 per euro. The US currency also fell against the pound sterling and the Swiss franc. The private sector created only 150,000 jobs in June in the US, at least for five months and below the 160,000 new positions announced by economists.

At the same time, new unemployment cases in the US increased, as did the total number of job seekers. In addition, the ISM institute found that activity in services fell in June, falling to the lowest since May 2020, at the start of the coronavirus pandemic. “There are signs of slowing down, then The dollar is under pressure»explained ForexLive analyst Adam Button.

A rate cut in September?

The minutes of the latest Fed meeting, released on Wednesday, showed that central bankers were monitoring the employment effects of their monetary policy more closely and were concerned about the difficulties faced by low-income households due to tight credit conditions. “It builds our confidence in the scenario of a first rate cut in September”responded, in a note, Ryan Sweet, analyst at Oxford Economics.

Operators now attribute a probability of 72% to the hypothesis of a reduction in rates in September. The bond market reflected that outlook on Wednesday, with the yield on 10-year US Treasuries falling to 4.35% from 4.43% the previous day at the close. Therefore, the monthly report on US employment, expected on Friday, could tip the dollar, warns Adam Button. “If the figure is low, the market can quickly price in an interest rate cut” and the dollar settles below $1.08 per euro, or even 1.09, according to this analyst.