The Dollar Index (DXY) is back at its strongest level since early August and one could easily forget that the Fed had started its easing cycle with a surprisingly large 50bp rate cut in September. Driving this USD strength has been the macro divergence story and investors seemingly positioning for Republican success next week, ING’s FX analyst Chris Turner notes.
DXY looks to stay bid
“This week will focus on jobs data, price data and a broad look at activity in the first release of US third-quarter GDP data on Wednesday. On jobs, job opening JOLTS data on Tuesday and the October payrolls report on Friday could come in a little softer than expected – although hurricanes may have played a role here and investors may not overreact to soft numbers.”
“On price data, Thursday's release of the September core PCE price data could show an unwelcome 0.3% MoM reading. And when it comes to broader activity, most expect the US to have posted a very decent 3%+ QoQ annualised GDP on Thursday, again led by strong consumption. Even though we strongly favour the Fed cutting two more times this year, this week's data may not substantially alter the pricing of just 39bp of further Fed easing this year.”
“So far it seems that October's run-up in US Treasury yields has been largely driven by growth and rate expectations, not fiscal concerns. And we would imagine the US Treasury would like to keep a low profile with this announcement ahead of elections next week. While acknowledging that the dollar has come a long way very quickly this month, it is hard to see the dollar – yet – reversing those gains. This means DXY looks to stay bid in the 104-105 range for now.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Extra relief is seen above 0.6630
AUD/USD picked up fresh upside traction and left behind three daily drops in a row, advancing to the boundaries of the key 0.6600 barrier on the back of the persistent offered bias surrounding the US Dollar.
EUR/USD needs to clear the 200-day SMA to allow for further gains
EUR/USD advanced further, extending its weekly recovery for the third consecutive day and putting the critical 200-day SMA to the test in the 1.0870 zone against the backdrop of the resurgence of the downward bias in the Greenback.
Gold slowly but steadily approaching $2,800
Gold pulls away from the all-time-high it set near $2,790 earlier in the day and trades at around $2,780. With the US Dollar struggling to find demand after mixed macroeconomic data releases, however, XAU/USD's downside remains limited.
Bank of Japan set to hold interest rates steady as rising inflation points to year-end hike
The Bank of Japan is widely expected to maintain its short-term interest rate at around 0.25%, following the conclusion of its two-day monetary policy review on Thursday. The BoJ decision will be accompanied by the bank’s quarterly outlook report, which will be released at around 3:00 GMT.
German economy surprises in the third quarter
The German economy avoided a technical recession in the third quarter, showing unexpected growth. However, this does not change the fact that the economy remains stuck in stagnation.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.