The dollar looks set to end the week on the front foot, having rallied over the past three days after a weak spell following the BoE’s intervention in the Gilt market last Wednesday. The key driver behind this rebound has been robust US data: September’s payroll data released today – along with the ISM indices earlier this week – appear consistent with the Fed’s intention to aggressively hike its policy rate over the next two meetings. Next week’s US CPI data will likely reinforce this view, even if it edges lower as we expect. This suggests to us that the Fed’s hawkish stance will remain supportive of the dollar for some time yet.
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