USD Gains May Be Short-Lived Amid Wages Growth Concerns
According to Roger J Kerr, the Kiwi dollar is caught in the immediate backwash of USD appreciation. However, US wages and jobs numbers do not support the narrative that the economy is booming.
President Trump and his allies, including Kevin Warsh at the US Federal Reserve, claim that the strong US economy will solve the fiscal deficit problem with higher tax revenue inflows. But their claims are under scrutiny as the US Government projects to receive $5.40 trillion in tax revenue by 2026, which is only a small increase from the projected deficit of $2 trillion.
The increase in US secondary market bond yields will add to the Federal Government's annual interest bill, making it a death spiral for any sovereign bond issuer. The latest jobs data shows that wages growth remains low, with average hourly earnings increasing by 0.10% in September and an annual rate of 3.00%, below the CPI inflation rate of 3.40%. This is deflationary and may not justify further interest rate hikes.