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Will US job numbers take off for the Fed?

The Federal Reserve is unhappy about an announcement that it will soon scale down its massive stimulus program, and Friday’s job report could provide the framework for such a move as early as November.

The US Federal Reserve has said it will buy $ 120 billion a month from the Treasury and mortgage-backed securities until it achieves “significant further progress” with two goals: inflation averaging about 2 percent and maximum employment.

Rising consumer prices have long meant that the first of these targets has been met, but many Fed officials have indicated they want to see further gains in employment before proceeding with plans to reduce or reduce support.

Fed Chairman Jay Powell said at the most recent monetary policy meeting that the job threshold had been reached almost all, and that he did not have to “see a knockout, amazing, super strong employment report” for September ” to feel like a test has been taken ”.

Economists polled by Bloomberg expect 488,000 new jobs to be created for the month, more than double the surprisingly weak earnings seen in August. Only 235,000 jobs were then added, sharply lower than the roughly 1 million jobs created in June and July and far less than the 733,000 jobs economists had expected.

Analysts said the slowdown in job growth stems not only from Delta’s growing cases, which hampered business operations, but the deteriorating labor shortages.

Patrick Harker, president of the Philadelphia Fed, said at a recent event that the Fed’s purchases’ were necessary to keep markets functioning during the acute phase of the crisis. But to the extent that we are still dealing with a labor force issue, the problem lies on the supply side, not in the demand. “

‘You can not enter a restaurant or drive down a commercial strip without noticing a sea of’ Help Wanted ‘signs. Buying assets does nothing or nothing to improve it, ”says Harker. Colby Smith

Will the pound continue to weaken?

Sterling tumbled to its lowest level of the year last week against a rising dollar as investors worried the UK’s crisis in the supply chain could undermine the strength of the country’s economic recovery.

The declines came despite a sharp rise in UK government bond yields after the Bank of England surprised markets by saying it could raise interest rates as soon as later this year to tame high inflation.

Sterling recovered slightly from last week’s low in 2021 against the US dollar of $ 1,341, ending the low at $ 1.3562.

Line chart of $ per £ showing the pound to a year's low against the rising dollar

According to Mark McCormick, head of FX strategy at TD Securities, the decline in the pound has left it undervalued, betting on its recovery against the euro.

“The market story likes the pound on a so-called Hawkish BoE outlook, and then hates it because inflation is getting out of control,” he said. “The truth probably lies somewhere in the middle.”

Some analysts believe that the recovery of the pound against the dollar may be more difficult. The dollar reached its highest level in more than a year last week against a basket of other currencies, strengthened by the prospect of the US Federal Reserve tightening its monetary policy and concerns about global growth, which investors tend to call the relative safety of the world’s reserve currency.

“I do not think the dollar will pull back significantly until you improve your global risk appetite,” said Jane Foley, head of FX strategy at Rabobank. “For that, you need stronger growth prospects, and right now the direction of the journey is to weaker data.” Tommy Stubbington

How will Australian policymakers react to rising house prices?

The central bank of Australia will keep the interest rate almost in turn when it meets on Tuesday, with falling iron ore prices and softer retail sales and jobs offsetting the impact of a scorching housing market.

“The consensus is no change in rates and nothing about quantitative easing,” said Shane Oliver, chief economist at AMP Capital.

At its meeting last month, the Reserve Bank of Australia announced that it would reduce mortgage purchases from $ 5 billion a week to $ 4 billion, but extended the program until “at least mid-February 2022”, citing “increased uncertainty” due to the outbreak of the Delta variant of Covid-19.

But a group of Australian regulators, including the RBA, said last Wednesday that house prices were still rising “rapidly in most markets”, and credit growth was likely to remain strong.

The speculation of credit growth exceeding the increases in household income would contribute to the medium-term risks facing the economy ‘, although lending practices remain’ healthy ‘, regulators say.

In the medium term, a Bank of America research report said Australian economic data was expected to “deteriorate” to “reflect the closures”, but a “solid setback is expected thereafter”.

The RBA has said it will not raise its interest rate until inflation is ‘sustainable’ within a target of 2 to 3 per cent, a condition which he says is unlikely before 2024.

Oliver said the mixed data from the region supports the scenario. “The fall in the iron ore price, the weakness in China and concerns about Evergrande all support the Reserve Bank in a dead-end approach to interest rates,” he said. Anthony Klan

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