US Dollar: Uptrend intact as NFP looms – BBH

Brown Brothers Harriman’s Elias Haddad notes the recent US Dollar rally and bond selloff have stalled as FOMC officials temper expectations for an October rate hike. However, the Dollar uptrend since the hot August CPI and September Fed hike remains intact, supported by resilient US growth, strong labor demand and sticky inflation ahead of September NFP data.

Dollar rally pauses before payrolls

"Meanwhile, the USD rally and bond market selloff stalled. This week’s comments by three FOMC heavyweights helped trim bets of a back-to-back hike in October."

"The USD uptrend sparked by the hot August CPI print in early September and turbocharged by the Fed’s hawkish hike on September 16 remains intact. Resilient US economic activity, improving labor demand, and sticky inflation back the case for additional Fed tightening."

"The Atlanta Fed GDPNow model estimates above trend annualized real GDP growth of 3.7% in Q3 vs. 2.2% in Q2. Today, the September nonfarm payrolls (NFP) report will provide a fresh gauge of labor demand (1:30pm London, 8:30am New York)."

"Consensus is looking for NFP gains of +90k vs. +162k in August. Bloomberg’s whisper number is +84k while ADP private payrolls and Revelio Labs employment imply NFP gains of +67K."

"Fed Funds futures imply 75bps of hikes over the next twelve months."