USD: Jobless claim rebound helping the US Dollar – ING

The US Dollar (USD) was given a helping hand yesterday by some positive data surprises, which prevented it, in our view, from giving up post-Fed gains. Jobless claims dropped back to 231k in the week ending 13 September, signalling the previous week’s spike to 264k might have been a fluke. Continuing claims – a measure of the difficulty of entering the jobs market – dropped to 1920k versus a 1950k consensus expectation, and last week’s figures were revised lower from 1939k to 1927k, ING's FX analyst Francesco Pesole notes.

Markets focus on Trump/Xi call

"This was rare positive news on the jobs market, and one that justifies the dollar’s staying bid for now. However, our call remains that the Fed will cut again in October as payrolls keep pointing to broad labour market deterioration and inflation fails to rise enough to deviate from what the Dot Plot is signalling (two more cuts this year). We think markets will also keep using the Dot Plot as the anchor for rate expectations, which should keep the bar quite high for a major hawkish repricing and sustained dollar support."

"Today’s big event is the phone call between US President Trump and China's President Xi Jinping, scheduled for 9AM ET/3PM CEST. The topic will be a framework agreement to shift TikTok US’s control from Chinese to US ownership, but we can expect some discussion on trade, and there are some expectations that this may lead to an in-person meeting. Direct communication has often led to positive headlines on trade relationships, which should be mainly visible in China proxies AUD and NZD in the G10."

"We still think the dollar is trading too much on the strong side after the Fed meeting and expect some pullback in the coming days. Cheaper funding costs should contribute to fuel hedging demand for the USD and prevent larger appreciative trends. The data calendar is light today, but expect dovish comments by Fed Governor Stephen Miran (who voted for a 50bp cut this week) alongside comments by Mary Daly."