US Dollar: Payrolls-driven relief selloff prospects – TD Securities
TD Securities’ FX team, led by Jayati Bharadwaj and Howard Du, expects the US Dollar (USD) to see a modest relief selloff into year-end, with weaker-than-expected payrolls potentially accelerating the decline.
TD Securities' FX team, headed by Jayati Bharadwaj and Howard Du, anticipates a modest relief selloff for the US Dollar (USD) before the end of the year. This outlook is based on weaker-than-expected payrolls data, which could further accelerate the decline. The team projects October job growth to be 40,000, following September's 29,000 increase.
FX options markets have already started positioning for a weaker USD in the coming months. After a significant rally since September, the base case now suggests a modest relief selloff similar to the USD's performance following the 2018 US midterm election. Lower-than-consensus payrolls figures could provide an extra catalyst for the USD retracement.
Despite a subdued-than-consensus print, the forecast predicts that job gains will be within the range of breakeven, resulting in an increase in the three-month moving average. With robust underlying economic activity and persistent inflation risks, a rate hike in December remains likely.
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