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The economic outlook on Tuesday’s U. S. trading session encompassed several readings that significantly impacted the performance of major currencies as well as Wall Street.
Market Sentiment
Market sentiment pushed the U. S. dollar to hit a one-year high on Tuesday on expectations the U.S. Federal Reserve will announce a tapering of its massive bond-buying program in November as concerns over soaring energy prices also sent investors to the safe-haven currency.
Treasury Yields
Yields on the U.S. two-year Treasury note jumped to their highest in more than 18 months, as investors sold U.S. debt, estimate that surging energy prices would fuel inflation and add to pressure on the Federal Reserve to take action sooner than anticipated.
Statements by Fed officials
Fed policymakers have honed in on November taper timeline. Fed’s Bostic and Clarida support the start of the bond tapering by the November meeting
Fed speakers have crossed the wires during the session. Raphael Bostic, President of the Federal Reserve in Atlanta, said that the slowdown in the US labor market should not derail the Fed’s taper timeline. He added, “would be comfortable starting tapering of asset purchase program in November.”
Meanwhile, the Federal Reserve Vice-Chairman Richard Clarida said that the bar for taper has all but met concerning the labor market. Further added, “if recovery remains on track, gradual tapering of asset purchases concluding middle of next year may soon be warranted.”
White House Getting Ready for Fresh Political Debate
To show he’s working to address product shortages driven in part by bottlenecks at major shipping ports, Biden will be meeting Wednesday with shipping executives and officials from Walmart, UPS and Home Depot.
Democratic strategists begin to prepare for what that could be of meaning for their predictions in the midterm elections. Republicans say they plan to seize on the weak points of the economy, hoping to link inflation and worker shortages to Biden’s policies, as part of their pitch to voters.
The House of Representatives on Tuesday is approaching voting on a bill to raise the U.S. debt limit. The bill when approved will move to President Joe Biden’s desk for his signature and enactment. It is expected to allow the Treasury Department to pay the nation’s bills until early December.
August’s JOLTS Job Openings
The number of job openings on the last business day of August declined to 10.4, the U. S. Bureau of Labor Statistics announced in its latest Job Openings and Labor Turnover Summary (JOLTS) on Tuesday.
This report doesn’t seem to be having a significant impact on the U. S. dollar’s performance against its rival currencies. The US Dollar Index was up 0.1% on the day at 90.45.
This reading came in lower than the market expectation of 10.9 million. Hires decreased to 6.3 million while total separations were little changed at 6.0 million.
IMF’s 2021 Global Growth Forecast
The International Monetary Fund is less optimistic about the global economy for 2021, but still sees reasonable growth over the medium term.
The World Economic Outlook, published Tuesday, expects global gross domestic product to grow by 5.9% this year; 0.1 percentage point lower than July estimate. For next year, the IMF has kept its global growth projection at 4.9%.
The revised outlook for this year comes amid supply chain issues in advanced economies and a worsening health situation in emerging countries.
The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics.
The most important headlines on Tuesday included:
White House’s one more month of economic debate
USD hits one year high as U.S. yields surge
U.S. shares hesitant amid energy and inflation concerns
