The U.S. Dollar is trading in uncertain ranges this morning as we start to return to normal in terms of economic data releases.
Overview
The U.S. Dollar is trading in uncertain ranges this morning as we start to return to normal in terms of economic data releases. ADP estimates, Durable Goods numbers, and the New York Fed’s services reading are typically seen as second-tier data releases, but they are grabbing attention this morning given the outstanding data backlog. Initial reactions are that the economy has done alright, and the Fed does not need to rush into further cuts, but a stagnating labor market has the potential to force their hand.
Jobless claims for the week of October 18th were unexpectedly dropped overnight, but FX markets were relatively unconcerned as they brace for the more impactful payroll data coming on Thursday. The chances of an interest rate cut from the Fed in December have rebounded slightly from yesterday, sitting at 46.8% this morning, but a weak data showing on Thursday is going to be more or less required to get that probability back over 50.0%.
What to Watch This Week…
- GDP and Labor numbers potentially out Thursday
- CPI for September out Thursday
- Monex USA Online is always open
GBP ⇓
The Pound Sterling extends its decline, down for the third day against the Buck. UK economic forecasts have come in essentially at expectations this morning, but the Bank of England’s Chief Economist Huw Pill notes that inflation and wage growth are both still above target and that structural changes, alongside mixed labor market indicators, indicate that the latest data release may not tell the full story. We are keeping our eyes on the November 26th budget release.
JPY ⇓
The Japanese Yen is off to a weak start today against the Buck, sitting near a 35-year low. Bank of Japan Governor Ueda has signaled to Prime Minister Takaichi that he intends to begin raising interest rates. Japan has hiked borrowing costs only twice since 2007, so this marks a significant divergence from historical policy. Ueda’s signal comes the day after a release showing that the Japanese economy has contracted 1.8%YoY, for the first decline in a year and a half. This contraction will likely embolden PM Takaichi to implement the reported USD 110 Billion stimulus package that is under consideration. Traders are anxious about such drastic intervention while at a multi-decade low, but we must wait and see.
