U.S. Data Strength Puts Pressure on Rate Cut Expectations
BlockBeats News, August 28th. The price of U.S. short-term Treasury bonds edged down slightly as strong U.S. economic growth and employment data slightly weakened the market's belief that the Federal Reserve will cut interest rates twice before the end of the year. The U.S. second-quarter economic growth rate was revised from 3% to 3.3%, exceeding economists' expectations. After the data was released, the yields on two to five-year U.S. Treasury bonds rose by at least two basis points to a daily high. Meanwhile, the initial jobless claims saw a larger-than-expected decline, which is a strong signal for the labor market.
Sudra Rajappa, U.S. Rate Strategist at Natixis, stated: "The data continues to show that despite trade uncertainty, consumers still exhibit resilience." Rajappa noted that the front end of the U.S. Treasury yield curve is feeling the "tug-of-war" on whether the Fed should cut rates in September. She added that although Fed Chairman Powell "leans towards a more dovish stance, the data continues to dampen the need for rate cuts." (FXStreet)
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