Dollar rally may have 'gone a little bit too far' – NFP unlikely to 'ignite' October hike bets

The Dollar has appreciated versus most currencies again so far this week, as rising yields globally continue to drive investors to the safehavens, while market participants not only brace for another Fed rate hike this year, but price in further aggressive rate increases in 2027.

We still think that the move has perhaps gone a little bit too far, and we wouldn't be at all surprised to see a mild correction in the coming days should oil prices, bond yields and risk sentiment stabilise.

Data out yesterday suggests that the US economy is also not completely impenetrable, with both consumer confidence (81.9) and JOLTS job openings (7.079M) fell quite sharply at the latest reading.

This week will be a very important one of macroeconomic data out of the world’s largest economy. ADP employment and revised second quarter GDP figures will be released later today ahead of the September nonfarm payrolls report on Friday. With the Fed’s focus squarely on inflation, we don’t think that this week’s NFP data will be enough in of itself to ignite a flurry for October rate hike bets, but clearly another solid report won’t in any way dissuade policymakers at the need to hike.