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BusinessToday
4 hours ago
- Business
- BusinessToday
Weaker US Jobs Data Boosts Ringgit To RM4.22
The ringgit opened stronger against the US dollar on Friday, buoyed by rising expectations of a rate cut at the US Federal Reserve's upcoming policy meeting, following weaker-than-expected economic data. At 8 am, the local note appreciated to 4.2205/2405 against the greenback compared to Thursday's close of 4.2340/2385. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US Dollar Index dipped 0.09% to 98,084 points as expectations of a rate cut in September gain traction. 'Expect the ringgit against the US dollar to hover around RM4.22 to RM4.23 today,' he added. He noted that initial US jobless claims rose to 226,000 last week, exceeding market forecasts of 221,000. This marked a second straight weekly increase, suggesting signs of weakness in the labour market, although the Federal Open Market Committee still requires more data before its September meeting. On the domestic front, he said the ringgit could find support after facing some selling pressure during the previous afternoon session. The local unit also strengthened against most regional peers in early trade. It appreciated against the Singapore dollar to 3.2906/3064 from 3.2973/3013, firmed versus the Thai baht to 13.0653/1346 from 13.0954/1146, and rose against the Philippine peso to 7.39/7.44 from 7.42/7.44. The ringgit also gained on the Indonesian rupiah to 259.1/260.4 from 259.9/260.3. However, it was mostly lower against major currencies. It eased against the Japanese yen to 2.8750/8888 from 2.8732/8765 and fell against the British pound to 5.6770/7039 from 5.6596/6656. It did, however, strengthen against the euro to 4.9283/9516 from 4.9411/9463.
Business Recorder
4 days ago
- Business
- Business Recorder
Economic reports do little to uplift global equity markets
The US Non-Farm Payroll (NFP) faced a significant decline in July, reporting 73,000 jobs added, well below the anticipated 102,000. Furthermore, the June figures were downgraded from 147,000 to a mere 14,000. The unemployment rate climbed to 4.2 percent, up from 4.1 percent. This unemployment report clearly indicates that the effects of tariffs are beginning to emerge, negatively impacting the labor market. This situation strengthens the argument for a potential interest rate cut in September, suggesting a slowdown in hiring momentum. In the aftermath of this economic data release, two Federal Open Market Committee (FOMC) members who previously voted for a rate cut, Christopher Waller and Michelle Bowman, issued a statement advocating for proactive measures in light of the slowing growth and weakening labor market. They expressed their belief that the current tariff effects are only temporary and suggested that if inflation or employment rebounds more quickly than expected, the Federal Reserve could respond accordingly. On Friday, the US ISM Manufacturing PMI also fell short of expectations, dropping to 48 in July from a target of 49, marking the fifth consecutive month of decline and signaling a decrease in factory production. The unexpectedly weak jobs report, particularly for June took many in the market by surprise and led to a sharp decline in the value of the US dollar. The economic reports did little to uplift global equity markets, reflecting the growing unease following recent tariff actions, especially after the implementation of a reciprocal executive order effective August 1. Countries like Canada, Switzerland, and Brazil were particularly affected by the increased rates. The impact of these reciprocal tariffs will extend beyond American trading partners, as they are projected to raise the cost of everyday goods, ultimately affecting the US consumer. In the meantime, the Bank of Japan (BOJ) has kept its policy rate steady at 0.50 percent. The BOJ is cautiously optimistic due to increasing external risks and has raised its inflation target for 2025 significantly, from 2.2 percent to 2.7 percent. This adjustment is primarily attributed to a sharp anticipated increase in food prices. Following the announcement of a trade breakthrough between the US and Japan, market sentiment shifted to a more hawkish stance. This change was driven by a reciprocal trade tariff deal that reduced rates from 25 percent to 15 percent. Although the specifics of the Japanese investment package remain unclear, its estimated value is around USD 550 billion. However, the outlook has turned dovish, as market participants believe that the effects on inflation may take time to materialize. This has led to significant fluctuations in the USD/JPY exchange rate, with the USD later softening against the JPY after disappointing US non-farm payroll data was released. On Thursday, the Bank of England (BoE) will reveal its policy rate. Past announcements have indicated a divide among policymakers regarding interest rates, making this decision particularly intriguing. The situation is complicated by a persistently weak job market coupled with ongoing inflationary pressures. The likelihood of a 25 basis point rate cut to 4 percent appears favourable, though an unexpected increase in headline consumer price inflation to 3.6 percent in June poses a potential obstacle, indicating robust price growth. Meanwhile, gold, which experienced selling pressure after the Federal Reserve decided to keep interest rates unchanged, was further impacted by the Fed Chair's comments during the press conference, stating that no decisions had been made regarding September. However, gold saw a spike in value at the end of the week following the release of weaker than expected job data. The evident economic uncertainty in the US is prompting investors to turn to gold as a safe haven. The combination of trade tensions and poor US economic indicators is particularly encouraging for gold investors. Looking ahead, this week's US economic data is rather light. The ISM Services PMI will be released on Tuesday, followed by the announcement of weekly jobless claims on Thursday. WEEKLY OUTLOOK — Aug 4-8 GOLD @ USD 3362— Gold may begin the new week by attempting to reach new highs before pulling back. A break above USD 3386 would pave the way for a move toward USD 3415. This is not a favoured move. I wouldn't be surprised to see a correction. On the downside, there is support at USD 3325. A break below this level could lead to a drop to the USD 3302-05 range. Adopting a 'buy the dips' strategy seems to be favorable for the week. EURO @ 1.1586— I anticipate that the Euro will remain above the support level of 1.1465. If it breaks past 1.1680, this could lead to a test of 1.1740. If not, keep an eye on 1.1420. GBP @ 1.3280— Pound Sterling may rise, but it must break above 1.3360 to reach 1.3440. Keep an eye on 1.3170. A breakdown there could lead to 1.3090. JPY @ 147.38— If the $/JPY pair cannot surpass 148.60, there is a possibility of testing the 146.60-70 levels. A breakdown could lead to further losses for the Dollar. Or else 149.20. Copyright Business Recorder, 2025
Yahoo
6 days ago
- Business
- Yahoo
In a dissent not seen in three decades, two Fed governors wanted to cut interest rates and here is why
Federal Reserve Governors Michelle Bowman and Christopher Waller on Friday released statements outlining why they supported an interest rate cut at this week's meeting. It marked the first time in more than 30 years that two Fed governors dissented from a decision about rates. The last time was in 1993. Bowman and Waller on Wednesday dissented from the Federal Open Market Committee's (FOMC) 9-2 vote to hold the Fed's benchmark federal funds rate at a range of 4.25% to 4.5%, with both saying they would've supported a 25-basis-point cut to the key interest rate. Dissents by FOMC members occur periodically, and the most recent dissent came from Bowman in September 2024, when she argued the Fed should have cut interest rates by just 25-basis-points instead of the 50-basis-point cut that policymakers voted to proceed with. Bowman said in her latest dissent that the Fed should have cut rates and wrote, "Inflation has moved considerably closer to our target, after excluding temporary effects from tariffs, and the labor market remains near full employment." Federal Reserve Holds Key Interest Rate Steady For Fifth Straight Meeting Despite Trump's Pressure "With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting. In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market," Bowman explained. Read On The Fox Business App She went on to say that she has gained "even greater confidence that tariffs will not present a persistent shock to inflation," which warrants more focus on risks to the employment side of the Fed's dual mandate. Waller explained in his dissent that central banks should "look through" tariffs as "one-off increases in the price level" that "do not cause inflation beyond a temporary increase." Trump Slams Powell As 'Moron' And Calls For Fed's Board To Take Control Of Policy Moves He cited economic data including soft growth in the first half of 2025, with real gross domestic product (GDP) at 1.2%, as suggesting the monetary policy rate should be closer to neutral given the "temporary" effects of tariffs on inflation and the labor market near full employment. Waller said the median FOMC participant estimates the neutral rate to be about 3%, which would imply cuts of 125 to 150-basis-points from the current range. "My final reason to favor a cut now is that while the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased," he wrote. Waller said that he respects the FOMC's majority view that a "wait and see" approach on the impact of tariffs on inflation was more appropriate, saying that different views are healthy for robust policy discussions. But he added that, "I believe that the wait and see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve." Trump Hits Powell As 'Total Loser' After Fed Leaves Rates Unchanged Waller added that he doesn't think the FOMC should cut rates on a predetermined path and that if tariffs don't cause an inflationary shock, cuts can continue, and if they do cause surprises to inflation and employment, the Fed can pause those cuts. During his press conference after the FOMC decision, Federal Reserve Chair Jerome Powell acknowledged the dissents and said he appreciated that they provided clear explanations of their thinking and that different views are healthy on committees such as the FOMC. He also said that while tariff-induced price hikes could be brief, one time occurrences, there remains the possibility that it drives more inflationary pressures. Us Job Growth Cooled In July Amid Growing Economic Uncertainty Following the FOMC announcement on Wednesday, the Commerce Department on Thursday released its personal consumption expenditures (PCE) index. The Fed's preferred inflation gauge showed that inflation accelerated in June, rising from 2.3% to 2.6% on an annual basis – further away from the Fed's 2% goal. That was followed by Friday's weaker-than-expected jobs report, which showed the economy added just 74,000 jobs in July – well below the 110,000 estimate of LSEG economists – while job gains in May and June were revised downward by 258,000. Rising inflation figures, and a disagreement among policymakers on how to approach them given the impact of tariffs, coupled with what appears to be a weakening labor market, could complicate the Fed's path article source: In a dissent not seen in three decades, two Fed governors wanted to cut interest rates and here is why
Yahoo
6 days ago
- Business
- Yahoo
Retirees: Be very, very worried about who will replace Jerome Powell at the Fed
If you're retired, or you're living on passive income from bonds and the like, you have every reason to be grateful to Federal Reserve Chair Jerome Powell. He has fought bitterly for three years to bring inflation back under control and keep it there, a campaign that is absolutely essential to maintaining your standard of living. And you should be very worried about who President Donald Trump appoints to succeed him next year — and what that will mean for the Fed, inflation and real bond income in the years to follow. Based on what Trump said on Wednesday, he doesn't understand inflation, he doesn't understand the effects of interest rates on the real economy, and he either doesn't understand about retirees and income or he doesn't care. 'I told him that wouldn't fly': My 90-year-old mother's adviser pushed her to change her beneficiaries. What is going on? Social Security wants to make a change that would cause 3.4 million more people to have to visit its field offices Amazon's stock is falling, as this trend from earnings has investors worried I'm trustee of $65,000 going to my nephew. What are the rules for what I can do with the money? Don't believe me? Follow the facts. Powell and all but two other members of the rate-setting Federal Open Market Committee voted yet again to keep short-term rates on hold at 4.25% to 4.5%. Powell, explaining the decision afterwards, repeated the simple and irrefutable argument he has been making since 2022. In brief: A stitch in time saves nine. It's better to keep rates a little too high now than to be too easy with monetary policy and risk letting inflation back out of the bag. That's because it is harder — a lot harder — to get inflation back under control than it is to keep it under control. This is the clear lesson of history. It is not news to anyone who observed Powell and the Fed's error of 2021, when they thought inflation was 'transitory' and let it get too high. It is certainly not news to anyone who remembers the 1970s, when the Fed repeatedly cut rates by too much, too soon, leading to a decade of stagflation. Powell added that the main reason resurgent inflation is still a risk is because of Trump's tariffs. These have already shown up in higher prices, Powell said, and it is still 'early days.' Prices will rise further in the months ahead as tariffs, which are sales taxes on imports, show up in the prices we all see on the shelves. For good measure, Powell concluded by pointing out that current interest rates are only 'moderately' restrictive anyway. The job market remains healthy. There are no signs yet of a significant slowdown. Meanwhile, what did Trump say? Once again, the president criticized Powell and the Fed for failing to cut short-term rates. And his comments were extraordinary. 'Right now there's no inflation,' the president said. 'We have no inflation.' Really? This must come as news to anyone who's been shopping lately. This must come as news to everyone else, too. The Labor Department recently reported that the official inflation rate — meaning the rise in the consumer-price index over the past 12 months — was 2.7%. That's well above the Fed's long-term 2% target, which is precisely why the Fed, and Powell, remain vigilant. And the real story is worse: The Labor Department reports that consumer prices across the economy rose 0.3% just in the last month, an annualized rate of 3.7%. Trump's statement that 'there's no inflation' must also come as news to all those investors who own trillions — literally — of dollars in U.S. Treasurys and other bonds. Right now the bond market believes that inflation is running hot and that it will stay hot. It is expected to average 2.5% over the next five years. If Trump knows something they don't, that inflation is really zero, his family could stop wasting their time betting on the collapse of the U.S. dollar through crypto ventures and throw all their money into long-term Treasury bonds instead. I'd be happy to advise them, in exchange for a very modest fee. (Ivanka, feel free to call. Cash up front, I'm afraid. And no, I don't accept $TRUMP or $MELANIA meme coins either. Sorry.) A simple exchange-traded fund, the Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF ZROZ, bets on the very longest Treasurys. Based on where the price was in 2020, when inflation collapsed at the start of the COVID crisis, this ETF could reliably be expected to triple if it turns out that the president is right and 'there is no inflation.' I assume that those who agree with the president that 'there is no inflation' have all their money in ZROZ as well. Meanwhile, if tariffs are not causing any rise in consumer prices, why then do the president and his Senate MAGA ally Josh Hawley want to spend maybe $150 billion a year of taxpayers' money compensating voters (mostly in red states) for … er … the higher prices caused by tariffs? Trump complains that by keeping its benchmark rate high, the Fed is keeping mortgage rates high and hurting the U.S. housing market. 'We're keeping the rates high, and it's hurting people from buying houses,' he said. Heaven help us. The Fed does not set mortgage rates. Quite the contrary: Mortgage rates, and most particularly the interest rate on 30-year fixed-rate mortgages, are based on the interest rates on long-term bonds, not on the Fed's overnight money rates. And when the bond market sets the interest rate on long-term bonds, its main concern is … the risk of inflation. The more that bondholders worry about long-term inflation, the higher the interest rate they will demand as compensation to lend money for 10, 20 or 30 years. As a result, by keeping short-term interest rates a little high to crush inflation, Powell is keeping long-term rates down, not pushing them up. This is why those long-term interest rates suddenly spiked a few weeks ago, when the market thought Trump was about to fire Powell, seize control of the Fed and push it to slash short-term rates. And it's why mortgage rates, and long-term Treasury yields, kept falling last year as long as the Fed kept short-term interest rates high. The moment the Fed cut rates, last September, those longer-term rates started rising again. (You could think of it like a seesaw.) Meanwhile, what does Trump think the Fed should do to keep inflation under control? He was asked what would happen if he got his way and the Fed slashed rates, and then inflation rebounded. 'Well, if that happens we just raise them,' Trump replied, referring to short-term rates. 'What you do is you lower them and let's see if there's inflation. … If that happens, what you do is you raise your rates and you do what you have to do to stop inflation.' This is pretty much what they did in the 1970s. What could go wrong? And if the president really believed that we should 'do what you have to do to stop inflation,' he would be currently supporting the Fed, which is doing exactly that. Instead, Trump is focusing on the cost to the U.S. government of higher interest rates. Due to the government's massive, unconstrained borrowing over many years, and our gigantic national debt, Trump says that each 1-point cut in short-term rates would save the government $365 billion a year in interest costs. In other words, Trump wants the Fed to set interest rates for the convenience of the federal government, and of the politicians — particularly the administration — who want to borrow and spend. Where does he think rates should be? He has in the past suggested they should actually be below 1% right now. On Wednesday he said U.S. rates should be the lowest in the world. ('We should be the lowest interest rate, and we're not. … It's all because of the Fed.') As Japan and Switzerland now have rates well below 1%, we have to assume Trump wants U.S. rates down there. Thank heavens there's 'no inflation,' or that might be a total disaster. Next May, Powell's term as Fed chair will expire and a successor, appointed by Trump, will take over. Whoever the president picks will have to be approved by the Senate. In practice, that means all those fiercely independent, courageous Republican senators. Watch and cheer as they bravely stand up, once again, to the angry folks in red hats back in their home states. What are the odds we get a Trump puppet running the Fed in a year's time, following the president's advice on interest rates? You make the call. Meanwhile, ask me why the only U.S. Treasury bonds I hold in my retirement portfolio are TIPS — the ones with inflation protection. Will your spouse automatically inherit your 401(k)? 10 stocks favored to gain up to 30% in a sector that has missed this year's rally Apple's earnings were good, but the initial stock move implies Wall Street is wary
Los Angeles Times
7 days ago
- Business
- Los Angeles Times
Trump urges Fed board to ‘assume control' if rates not cut
President Donald Trump called on the Federal Reserve board to 'assume control' if Chair Jerome Powell does not lower interest rates, escalating his ongoing feud with the central bank's head. 'Jerome 'Too Late' Powell, a stubborn MORON, must substantially lower interest rates, NOW. IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!,' the president wrote on social media Friday. The White House did not immediately respond to a request for comment on the president's remarks. Trump's post came after Fed officials left interest rates unchanged on Wednesday. In his post-meeting press conference, Powell didn't offer any clear sign that policymakers were likely to cut at their next meeting, in September. Investors now anticipate just one cut by year's end. Rate decisions are made by the Federal Open Market Committee, which Powell chairs. Its voters include the seven members of the Fed Board of Governors in Washington, and five presidents of the Fed's regional reserve banks. The FOMC elects its leader and a vice chair once a year. Following Wednesday's decision, Trump resumed his sharp criticism of Powell after a short-lived detente, hammering the central bank chief over rate-setting policies and a renovation of the Fed's headquarters that critics have accused the chair of mismanaging. Trump has asked lawmakers about whether he should fire Powell, then told reporters he had no intention of doing so, suggesting he was willing to wait until the bank chief's term as chair ends in May. Two Fed governors, Christopher Waller and Michelle Bowman, voted against Wednesday's decision, the first time two members of the board have dissented since 1993. Trump cited those votes in a subsequent social media post, writing: 'STRONG DISSENTS ON FED BOARD. IT WILL ONLY GET STRONGER!' Treasury Secretary Scott Bessent said Thursday he expected Trump to be able to announce Powell's replacement by the end of the year. 'We are putting together a very good list of candidates,' he told CNBC. 'I would expect that we could have an announcement by the end of the year.' Bessent also pointed to dissenting voices in Wednesday's decision and to two potential openings on the Fed board early next year, suggesting that it could soon have a 'majority' of advocates in favor of rate cuts. Governor Adriana Kugler's position opens in January, and Powell's slot on the board would be the second, if he decides to leave the central bank altogether when his term as chair is up. Powell has leaned into the view that the Fed is well-positioned for now, given lingering uncertainties surrounding the economic impact of Trump's tariffs. His message on Wednesday was carefully balanced, tempering expectations for a September rate cut, but not closing the door to one. Lowenkron and Crane write for Bloomberg.
