USD: Dollar rally may only be temporarily halted – ING

The loss of momentum in the US Dollar (USD) rally we saw yesterday doesn’t seem to be the beginning of a broader trend. US yields were probably due an adjustment lower after the recent Treasury selloff, and that was mainly behind the slight dollar softening. Looking at both the US macro and political dynamics, the greenback can continue to find good support for the next few days, ING’s FX analysts Francesco Pesole note.

Greenback to find good support for the next few days

“Latest US data releases sent some contrasting signals on the jobs market, as jobless claims surprisingly fell while continuing claims rose. Remember that these figures are still being affected by the recent severe weather events and should probably be taken with a pinch of salt. On the activity side, high-frequency indicators have remained strong, and yesterday’s S&P Global composite PMI printed a surprise acceleration.”

“Today, the US calendar includes durable goods orders for September and a speech by FOMC’s Susan Collins. Fed officials have not given away much during the IMF week in Washington, suggesting they are – like the market – in a wait-and-see mode ahead of labour and inflation data that will determine whether to cut once or twice before year-end.”

“The polls are clearly telling us the election is too close to call, but markets and betting odds are leaning increasingly in favour of Trump. This may be due to the experience of the past two elections, where Trump was underestimated by polls, but also by greater hedging demand for a Trump presidency, which is seen as a more impactful macro/market event due to protectionism, tax cuts, strict migration policies and risks to the Fed independence.”