US Dollar: Consolidation view into ISM and payrolls – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes the Dollar is mixed as global equities rise and Oil stabilizes. Haddad argues the USD rally from May has likely ended, with US Dollar Index (DXY) expected to consolidate in a 96.00–100.00 range. Focus today is on US ISM Services Prices Paid and ADP payrolls, with Fed pricing seen more sensitive to inflation than employment.

DXY seen consolidating as data watched

"We believe the USD rally from May has run its course, with DXY poised to consolidate within a 96.00-100.00 range. The tailwind to USD from resilient US economic activity is offset by Fed Chair Kevin Warsh's failure to turn tough inflation rhetoric into a credible policy."

"July ADP private payrolls expected to indicate resilient labor demand (1:15pm London, 8:15am New York). Consensus is for the economy to add +65k jobs vs. +98k in June."

"July Services ISM to show solid growth momentum (3:00pm London, 10:00am New York). The headline index is expected to improve to 54.5 vs. 54.0 in June driven by an uptick in the New Orders. The Prices Paid index is seen easing to a five-month low at 65.0 vs. 67.7 in June, signaling diminishing upside risk to inflation."

"Kansas City Fed President Jeff Schmid (non-FOMC voter) delivered hawkish remarks overnight. Schmid stressed that the US economy “appears to be performing well” but “inflation is too high”, requiring “tighter policy.” Fed Governor Lisa Cook speaks on the economic outlook later today (9:05pm London, 4:00pm New York)."

"FOMC participants broadly agree that the labor market is in balance but are more divided over the durability of the inflation threat. That leaves Fed fund futures more sensitive to inflation than employment data. As such, the Prices Paid index will be closely scrutinized."

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