The US dollar remains slightly on the defensive but continues to trade above its 200-day moving average, according to analysts at Brown Brothers Harriman (BBH). Markets will focus on several second-tier US data releases today, including the ADP weekly employment estimate (1:15pm London / 8:15am New York) and components of the November Conference Board consumer confidence index (3:00pm London / 10:00am New York).
Retail Sales and PPI Data May Shape Dollar Outlook
BBH notes that last week’s ADP figures showed private employers cutting an average of 2,500 jobs per week in the four weeks ending November 1, reinforcing signs of a cooling labor market. Meanwhile, October’s Conference Board survey presented a mixed picture: the labor differential—the gap between “jobs plentiful” and “jobs hard to get”—improved slightly, but consumers grew more concerned about job prospects over the next six months.
Later today, markets will also receive September retail sales and PPI (1:30pm London / 8:30am New York). The retail sales control group, which feeds into GDP calculations, is expected to rise 0.3% m/m, down from 0.7% in August. Despite strong sales growth through the summer, BBH warns that slowing labor demand could pressure household incomes and dampen future consumption.
BBH maintains its view that the Federal Reserve will cut rates by 25bps in December, bringing the target range to 3.50%–3.75%, with markets pricing in a 77% probability. Analysts expect the USD to consolidate recent strength ahead of the December 10 FOMC meeting, but note that narrowing rate differentials between the US and other G6 economies make the dollar’s medium-term bias skewed to the downside.
