US Dollar trims some gains with the broader bullish trend intact

LONDON (October 28) The US Dollar (USD), as measured by the US Dollar index DXY, opens the week with moderate losses as investors brace for an eventful week. The third quarter’s US Gross Domestic Product (GDP), the Personal Consumption Expenditures (PCE) Price Index, and the Nonfarm Payrolls (NFP) report are all out in the coming days.

The broader trend, however, remains positive as investors dial back hopes of aggressive interest rate cuts by the Federal Reserve (Fed). A raft of strong US economic data and speculation of former US President Donald Trump winning the US presidential election on November 5, with his inflationary policies, are lifting US Treasury yields and dragging the US Dollar higher.
 

Daily digest market movers: The US Dollar consolidates as investors await growth and labour data

• The Greenback is trading within the previous week’s range, near three-month highs, and on track to a 4% rally in October, on its strongest monthly performance in two years.
   
• The solid labour figures have consolidated the idea that the US economy is outperforming the rest of the major economies, which will force the Fed to slow down its easing cycle.
   
• The CME FedWatch tool is pricing a 96% chance of a 25 basis point (bps) cut next week. Two weeks ago, the market was split between a 25 or a 50 bps cut in November.
   
• The US economy is expected to show a steady 3% yearly growth in the third quarter. In the current global context, these are solid numbers, consistent with a tight labour market and steady inflation.

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