ING’s Chris Turner notes that the US Dollar (USD) has reacted only modestly to the sharp sell-off in US tech stocks, with FX markets treating it as a sector-specific story. Turner expects the October US jobs report to confirm a solid labour market and sees US Dollar Index (DXY) holding within a 101.50-102.50 range.
"The big question for the dollar is whether this tech sell-off leads to a broader re-assessment of the US growth and inflation trajectory. US short-dated rates have fallen close to 50bp since late September and the dollar's yield advantage over other major pairs has softened a little. Feeding into that story today will be the October US jobs report."
"A decent jobs number today will confirm the Fed's understanding that the US jobs market is 'solid' and could provide some support to short-dated rates and the dollar. We still think it is too soon to call a broad-based dollar decline and that defensive positions in FX markets will be expressed through cross rates like a lower AUD/JPY or in the emerging world with a weaker South African rand or Mexican peso."
"The DXY dollar index is being remarkably resilient and can continue to trade towards the middle of a 101.50-102.50 range. Clearly, the dollar's liquidity advantages and near 4% one-week deposit rates are helping here."
"Expect defensive FX to outperform, rather than a broad dollar decline."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)