Dollar Uptrend Remains Intact Despite Recent Pause
The US Dollar's recent rally has stalled following comments from FOMC officials tempering expectations for an October rate hike. However, the Dollar's uptrend remains intact, supported by resilient US growth, strong labor demand, and sticky inflation ahead of September's nonfarm payrolls (NFP) report.
According to Brown Brothers Harriman's Elias Haddad, the recent pause in the USD rally is attributed to FOMC officials' comments, which have trimmed bets for a back-to-back hike in October. Despite this, the uptrend sparked by the hot August CPI print and turbocharged by the Fed's hawkish hike on September 16 remains intact.
US economic activity has been resilient, with above-trend annualized real GDP growth estimated at 3.7% in Q3 compared to 2.2% in Q2. The Atlanta Fed's GDPNow model supports this growth outlook, while labor demand is expected to be a key driver of the economy.
The September NFP report will provide a fresh gauge of labor demand today, with consensus looking for gains of +90k versus +162k in August. Bloomberg's whisper number suggests +84k, while ADP private payrolls and Revelio Labs employment imply NFP gains of +67K. Fed Funds futures also imply 75bps of hikes over the next twelve months.