A clutch of tier one data will enable traders to take a view on the path of US rate cuts for the remainder of the year. The US dollar remains a key outperformer of the major currencies and we consider the impact across forex, equities and commodities. We also look into key Brexit developments.
The US dollar bulls are back in the box seat again as performance edges higher again. The relative performance of the US economy remains the big standout of the major economies. The rate cut expectations for the remainder of 2019 are increasingly in the balance and so tier one data will be of major focus this week. If the US ISM data will be a good gauge for comparatives whilst the Non-farm Payrolls report will be poured over to see whether the decent real wage growth (now 1%/1.5%) remains supportive of the positive consumer sentiment environment. The US economy is expected to be growing at around 1.5% to 2.0% in Q3 against a Eurozone economy which is struggling with stagnation. However, traders will also be keeping a close eye on newsflow surrounding the US/China trade dispute. The next round of talks is on 10th/11th October and markets appear to be taking Trump’s assertion that a deal could be “sooner than you expect” with a pinch of salt. So Broadly we see the US dollar, which is not an outfight safe haven (of the ilk of the Yen or Swissy), moving into a bit of a sweetspot recently. Counterintuitively, right now, Treasury yields falling is deemed to be dollar positive. Yields falling and renewed dollar outperformance will also make it difficult for equities to perform well too. Wall Street pulled higher throughout early September as yields increased and the dollar fell. However, as yields have turned lower and the dollar higher, Wall Street has struggled to sustain the bull traction. The tier one data, reaction on Treasury yields and the dollar are key this week.