Keeping the pattern going in tomorrow night’s presidential debate – ING

August’s US jobs report failed to resolve the debate over whether the Federal Reserve will cut rates by 25bps or 50bps on September 18. There is no doubt that it will be cut at this point; Christopher Waller gave one of his economic speeches on Friday, titled “The Time Has Come,” echoing the phrase used by Chairman Jerome Powell at Jackson Hole. That speech was pretty equivocal, notes Chris Turner, ING’s FX strategist.

Kamala Harris and Donald Trump debate to move USD

“While arguing that front-loading interest rate cuts (read 50bp) might be appropriate if the data warranted, he seemed to think that while the economy was still growing, it might not there are arguments for aggressive rate cuts. After much gyration, USD and US short yields are not too far from where they started on Friday.”

“In terms of US data this week, we have the NFIB Small Business Outlook tomorrow and the highlight of the economic calendar on Wednesday when we see the CPI for August. Another low of 0.2% month-on-month is expected for core CPI. But potentially one of the biggest market movers this week is tomorrow night’s US presidential debate between Kamala Harris and Donald Trump. Joe Biden’s poor performance in the previous debate in late June foreshadowed a shift in the polls to Trump and a firmer USD.”

“All this probably means the USD remains in a holding pattern for now. We have previously noted that seasonal patterns tend to be positive for the USD in September – perhaps due to the US corporate tax payment deadlines this month. And it looks like it will now take a very long time to see the DXY break below 18-month lows near 100.”