USD: Dollar rally stalls – ING

Having been bid for a week, the dollar finally softened yesterday. The catalyst appeared to be some Challenger layoff data and also some alternative data suggesting October's NFP report, which we were meant to see today, should have fallen by 9k, ING's FX analyst Chris Turner notes.

Rallies may now stall in the 99.90/100.00 area

"Short-dated US rates had a sizeable 8bp drop on the day – a development that resonated in FX markets. But on the subject of jobs data, there is no sign of an end to the US government shutdown. It looks like Senators will be meeting over the weekend, however, so let's see whether there's any fresh news Monday morning. Betting markets actually attach a 46% probability to the shutdown lasting beyond 16 November."

"Back to the US, today sees the provisional University of Michigan consumer sentiment number for November. Expectations are for a still healthy 53 reading. And expect continued focus on the frothy Nasdaq, where sharp losses yesterday weighed on the yen crosses. December futures are currently calling Nasdaq a little higher at today's open. Additionally, we have a couple of Fed speakers, John Williams and Philip Jefferson, who sit at the dovish end of the spectrum. However, hard data rather than Fed speak looks to be the bigger dollar driver in the near term."

"DXY has stalled at the top of the three-month trading range and we expect it to come lower. It's not clear what will drive lower today, though. And one final point. We had been speculating over the last week whether tightness in US money markets had been contributing to dollar strength. Conditions in money markets seemed to have improved this week, where borrowing at the Fed's overnight Standing Repo Facility has dropped to zero after the $50bn that was being drawn this time last week. DXY may have topped out near 100.35 on Wednesday. If so, rallies may now stall in the 99.90/100.00 area."