US Dollar: Fed pricing supports Dollar resilience – ING

ING’s Chris Turner notes that the French debt sell-off triggered a reassessment of global rate expectations, but US short-dated yields only corrected modestly. With US labour data still solid and energy prices high, ING sees the Dollar retaining or slightly extending gains, with DXY targeting the 102.85.

Fed path keeps Dollar supported

"Perhaps adding to the correction lower in US rates were comments from Fed Vice Chair Philip Jefferson echoing remarks from John Williams earlier in the week that the Fed should not rush into back-to-back rate hikes. Pricing for a Fed hike in October has now dropped to just 28% from 70% a week ago, and it looks like the market is going to settle into the view that the next hike comes in December."

"Feeding into the Fed story will be today's release of the September non-farm payroll figure. Consensus expects around an +85/90k headline gain, an unemployment rate remaining low at 4.1% and a healthy average earnings figure near 3.1% year-on-year. Given very low growth in the US labour force, we doubt a downside disappointment in the headline number will weigh heavily on US rates or the dollar."

"With energy prices remaining at their highs and the US activity story resilient, it looks like the dollar can largely hold gains if not extend a little higher – especially against the euro. DXY broke to a new high for the year above 101.80 yesterday and looks biased to head up to the 102.85 area."