Strong Economic Data Boosts Pound Slightly
In 2024, Mary Daly, a member of the Federal Open Market Committee (FOMC) and President of the Federal Reserve Bank of San Francisco, stated that as inflation rates decline and the labor market cools, the Federal Reserve must remain vigilant, although she is optimistic about officials' ability to maintain the current economic expansion. Daly noted that, as with past periods of prolonged growth, a robust labor market has attracted more people to join the workforce, narrowing income disparities and benefiting workers significantly. Speaking at an event held by NYU Stern School of Business in New York on Tuesday, Daly said, "We have seen some of the same patterns reflected in the current economic expansion. The participation rate of prime-age workers has reached new highs. Compared to recent history, the current expansion is still relatively 'young'."
Daly indicated on Tuesday that the labor market has nearly returned to pre-pandemic levels and is no longer the primary source of inflationary pressure. She also stated that the Federal Reserve's goals for inflation and employment are currently balanced, adding that officials must continue to work to protect the strength of the labor market and achieve the 2% target for inflation. Daly said she would closely monitor data to determine how to reduce borrowing costs as quickly as possible, reiterating that there may be one or two rate cuts this year, but she remains open to the possibility of not cutting rates at one of the remaining two Federal Reserve policy meetings this year.
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Additionally, data released by the Office for National Statistics on Tuesday showed that the UK's three-month average total pay excluding bonuses in August rose by 4.9% year-on-year, the smallest increase since the second quarter of 2022, in line with market expectations and lower than the previous value of 5.1%. Although wage growth is still above the level that satisfies the Bank of England, it has slowed enough for the Bank of England to begin adjusting interest rates outside the restrictive range. The Bank of England cut interest rates for the first time since the pandemic in August. The market has largely priced in another rate cut by the Bank of England next month. The data also showed that the UK's unemployment rate (according to ILO standards) in August fell to 4%, lower than the market-expected 4.1%, reaching a historical low; the UK's ILO employment increased by 373,000 in August, significantly higher than the market-expected 250,000. However, given the issues faced by the Office for National Statistics in collecting survey feedback, economists have urged caution in interpreting the latest employment data.
Data to watch today includes the UK's September CPI year-on-year rate, the UK's September retail price index year-on-year rate, the UK's September unadjusted input PPI year-on-year rate, the US September import price index month-on-month rate, and Canada's August manufacturing sales month-on-month rate.
US Dollar Index
The US Dollar Index fluctuated and consolidated yesterday, closing slightly higher on the daily chart, currently trading near 103.20. In addition to the continued cooling of expectations for significant rate cuts by the Federal Reserve being the main factor supporting the US Dollar Index's continued gains, optimistic comments from Federal Reserve officials also provided some support to the exchange rate. During the session, FOMC member Daly expressed openness to the possibility of only one more rate cut this year. Today, attention is focused on the resistance near 103.70, with support near 102.70.
Euro/US Dollar
The Euro fluctuated downward yesterday, breaking through the 1.0900 threshold and reaching an 11-week low, currently trading near 1.0890. In addition to the US Dollar Index rising due to optimistic comments from Federal Reserve officials and the continued cooling of expectations for significant rate cuts by the Federal Reserve, which are the main reasons for the Euro's softening, investors' expectations for rate cuts by the European Central Bank also continue to exert some pressure on the exchange rate. Today, attention is focused on the resistance near 1.1000, with support near 1.0800.
Pound/US Dollar
The Pound fluctuated and consolidated yesterday, closing slightly higher on the daily chart, currently trading near 1.3070. In addition to short covering providing some support to the exchange rate, a series of good economic data announced by the UK during the session also provided some support. However, the US Dollar Index's continued rebound supported by multiple favorable factors and the rising expectations for rate cuts by the Bank of England limited the exchange rate's rebound space. Today, attention is focused on the resistance near 1.3150, with support near 1.3000.
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