Dollar looks better priced now – ING

Last week’s dollar sell-off had indeed come a little too far, a little too fast, and Friday’s bounce was understandable. Helping that was a shift in expectations for the 10 December FOMC meeting, where the probability of another 25bp cut is now priced at around 50%, ING’s FX analyst Chris Turner notes.

A lot of Fed speakers this week

“Presumably, the Federal Reserve is far happier with that kind of pricing, given the lack of available data currently. This also means that the dollar may not have to rally too far on Wednesday evening’s event risk of the FOMC minutes of that 28-29 October policy meeting. Remember that was the meeting where Chair Jerome Powell went out of his way to outline that another rate cut in December was far from a foregone conclusion and that there were ‘strongly differing’ views amongst the Fed.”

“It does indeed look as though data and events on Wednesday/Thursday this week will largely determine the next move for the dollar. Wednesday evening also sees Nvidia release quarterly results, and then on Thursday, we finally see the September NFP jobs report – including the unemployment rate. Consensus currently expects a +50k gain for payrolls and an unchanged unemployment rate at 4.3%. That’s probably a neutral/mildly dollar-positive outcome in that a Fed cut in December requires some actively weak US data.”

“There are also a lot of Fed speakers this week. Today’s pick of the bunch is probably Philip Jefferson’s speech at 3:30pm CET today. A repeat of the Fed’s recent message that it should not rush into further rate cuts and some uncertainty as to where the neutral policy rate actually sits is probably a mild dollar positive. DXY can probably hold the recent bounce and perhaps push onto the 99.50/65 area, where the move may stall.”