- US February labor figures showed weaker wage growth.
- The closure of SVB was the biggest bank failure since the financial crisis.
- Most economists predict the BOJ will abandon its yield control strategy this year.
Currency futures climbed on Friday as the dollar was hurt by signs of a softening US labor market. The United States February labor figures showed weaker wage growth, enhancing the chance that the Federal Reserve may restrict rate hikes to a minimum.
The US economy created more jobs than expected in February. However, slower pay growth and an increase in the unemployment rate have caused financial markets to drop expectations for an aggressive Fed. The probability of a 50-bps rate hike when Fed members meet in two weeks has decreased.
The closure of Silicon Valley Bank Financial Group, the biggest bank failure since the financial crisis, contributed to a decline in Treasury yields. This was yet another sign that high-interest rates were affecting the US economy.
On Friday, the Bank of Japan kept interest rates at historic lows and postponed changing its unpopular bond yield control policy. Bets that retiring central bank governor Haruhiko Kuroda would modify the yield curve control during his final policy meeting were undone.
Although Kuroda’s massive stimulus program is credited with saving the economy from deflation, it has also pressured bank earnings due to chronically low-interest rates. In addition, the country’s economy has barely recovered.
Most economists predict that the BOJ will abandon its yield control strategy this year, while some predict that Ueda will modify the policy within the next three months.
The pound increased on Friday due to news that Britain’s economy grew more than forecast in January, further easing fears of a recession.
Following a 0.5% decline in December, the Office for National Statistics said the British economy expanded by 0.3% in January.
The Bank of England is debating whether to raise interest rates once more at its meeting in March. According to pricing in the financial markets, the likelihood of a 25 basis point hike on March 23 decreased somewhat from 100% earlier this week to roughly 83% on Friday.
Data released on Friday revealed that the Canadian economy outperformed forecasts in February by creating 21,800 new jobs. This puts pressure on the Bank of Canada to contemplate another rate hike after declaring it intended to finish its year-long tightening campaign.