We’re about to enter the final quarter of what’s already been a tumultuous year for global financial markets.
And as it’s been for most of the year, it’s set to be yet another dollar-centric week for global markets, with investors and traders awaiting the next US jobs report as well as potential policy clues by Fed officials who are scheduled to make public comments over the coming week.
Monday, October 3
Tuesday, October 4
Wednesday, October 5
Thursday, October 6
Friday, October 7
Recently, the equally-weighted USD index soared past 1.28, well above the 1.25 level cited in our previous Week Ahead article (posted every Friday). 1.25 also marked the early-April 2020 cycle high.
However, this dollar index then swiftly unwound gains, as it pulled away from ‘overbought’ conditions, with its 14-day relative strength index moving back below the 70 level.
The upcoming US jobs report may help determine whether this USD index can be restored to its recent peak above 1.28, or at least remain at these elevated levels.
Here are the market forecasts at present:
If the US labour market continues to demonstrate its resilience, either by way of a higher-than-expected headline NFP figure or a lower-than-expected unemployment rate, that should ramp up market expectations for yet another 75-basis point hike by the Fed at its next policy decision due November 2nd.
Such ramped-up expectations may then restore the USD Index back up to 1.28.
Also, keep an eye on the slate of Fed officials who are scheduled to make public comments in the coming week.
Should they offer fresh signs that they’re willing to take bolder measures to quell stubbornly elevated US inflation, that may translate into more USD strength as well.
Alternatively, if market fears over an ultra-aggressive Fed further subside, that may in turn see the US dollar unwinding more of its recent gains.
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Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets.