Lots of data on the US labor market this week – ING

After selling off about 5% since early July, the US D (USD) bounced back last week. Clearly, the USD bear trend needs fueling and there was no shortage of supply last week. It’s a different story this week. After today’s US Labor Day public holiday, the US data calendar resumes with ISM manufacturing data (Tuesday), Wednesday’s JOLTS jobs data, ADP, jobless claims and ISM services (Thursday), and then the event the week’s main August Jobs report on Friday, notes Chris Turner, FX strategist at ING.

DXY to trade quietly amid US holidays

If the consensus is correct on Friday’s jobs report (165,000 jobs added and the unemployment rate falling back to 4.2%), then market prices will strengthen with only a 25bp cut at the start of the Fed’s easing cycle on September 18. Payroll could reach only 125,000, but the unemployment rate could reach as high as 4.4%. If so, the USD will return to test recent lows as the pendulum swings back to a 50 basis point Fed rate cut in September.

We will also see this week if the US opinion polls start to register in the currency markets. Arguably, July’s dollar sell-off was helped by the Democrats’ improved polling performance. As we now enter the run-up to November, opinion polls will become increasingly important, and this is sure to be a hot topic next week after the first Harris-Trump TV debate on September 10th.

Expect the Labor Day holiday to keep FX trading subdued today and we doubt DXY has the legs to break above the 101.85/102.00 region.