The most recent leg of the dollar bear trend has been triggered by the soft US labour market. July and August NFP data have forced the Fed to reassess its assumption of a ‘solid’ labour market, and the Fed looks set to restart its easing cycle next week. Today’s US data can shed a little more light on that reassessment of the US jobs market with the release of annual benchmark revisions in the year to March. In a recent speech, the Fed’s Christopher Waller said the downward revision could be worth as much as 60k per month. And perhaps that’s why the consensus for today’s revision – due at 16CET – is around 700k for the annual figure. This time last year, the preliminary revision was -818k and it looks like we would need to see a bigger number than that to trigger a fresh leg lower in short-term US interest rates and the dollar.
Today also sees the release of the NFIB Small Business Optimism Survey for August, which is expected to show gains after the dip in April. The employment component, rather than prices paid, will probably be the greater focus now.
The dollar has started the week a little weaker than we had thought. We still think short-dated USD money market rates could tighten into next Monday’s US corporate tax deadline and that might lead to some very temporary dollar strength, but let’s see.
DXY could find some support at 97.10/20 rather than directly testing the low of the year at 96.35. But the strong gains for gold and silver suggest investors are continuing to pursue inflation hedges – one of which the dollar is most certainly not.
Chris Turner