The dollar is a little weaker across the board at the start of the week. We mentioned yesterday how the low fixings in USD/CNY were a positive for EM currencies and a mild dollar negative, and once again, USD/CNY has been fixed lower in Asia last night. Optimism remains intact that Presidents Trump and Xi can agree on a meaningful trade truce this Thursday, where we remain very much focused on what happens to China’s threats of stringent controls on rare earth exports.
Leading the dollar lower overnight has been USD/JPY. Being blamed for the move are various comments from Japanese Finance Ministry officials that they are watching the yen closely – interpreted as some kind of low-level verbal intervention. But we have been here many times before, and such comments look unlikely to deliver a lasting reversal in USD/JPY. More interest will be had in Thursday’s Bank of Japan meeting, where no change is expected, but the market still attaches a 38% probability to a 25bp hike in December. Words to the effect that the BoJ still stands to normalise policy could prove a mild yen positive on Thursday.
But for the dollar itself, we’ve been bereft of data and are having to rely on anecdote. Today, the financial press is reporting that Amazon may be set to announce 30,000 job cuts. We haven’t had official job data for a while now, but surveys have suggested that consumers are increasingly worried about their job prospects. And later today, we’ll get the October release of the Conference Board’s Consumer Confidence survey. A weak number here could weigh on the dollar. Today also sees the release of the S&P Case-Shiller house price index for August, where house prices have fallen five months in a row. This will have relevance for both consumption and inflation, where lower imputed rents should provide more comfort to the Fed on inflation.
We’re not looking for big swings in the dollar, but a softish set of US data today could mean that DXY makes a run at 98.00 later in the day.
Chris Turner
