US Dollar: Could payrolls trigger a relief sell-off? – TD Securities

A modest relief sell-off in the US Dollar (USD) towards year-end remains the expectation of TD Securities’ FX team, led by Jayati Bharadwaj and Howard Du. Weaker-than-expected payrolls could hasten the decline. With FX options markets already positioning for further USD weakness, the team projects October job growth of 40k, compared with September’s increase of 29k.

Could the Dollar retrace its gains towards year-end?

"After a sharp rally since September, our base case has been for the USD to see a modest relief selloff into year-end, similar to how the USD had performed following the 2018 US midterm election."

"FX options market also appears to have already started to position for a weaker USD into year-end."

"A lower-than-consensus payrolls number could provide an additional catalyst for the USD retracement to take shape."

"We expect October NFP to remain subdued at 40k after job gains moderated to 29k in September."

"Despite the subdued, below-consensus print, our forecast would be within the range of breakeven job gains and result in an increase in the three-month moving average."

"With underlying activity in the economy robust and inflation risks still prominent, a hike in December is likely."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)