There’s not a whole lot in it to start the session but we’re seeing the dollar drop a little at the balance. EUR/USD is up 0.2% to 1.1610 while GBP/USD is flat again at 1.3130 after a drop to 1.3100 earlier on the softer Q3 UK GDP report. Even USD/JPY is back down to 154.65 but the pair remains in a bit of a battle in search of a break above 155.00 for now.
The end of the US government shutdown, which lasted 43 days, doesn’t quite mean that we will get much immediate data clarity on the US economy though.
The September reports for the non-farm payrolls and retail sales data remains pending, and we might not even get anything on the latter. Meanwhile, the White House has come out to say that the October reports for the labour market and inflation might not even be published at all. That is surely to steer clear of the conversation of very poor job figures, with October being particularly weak.
The whole idea seems to be pushing a case for the Fed to cut rates again next month. As things stand, traders are pricing in ~55% odds of that. That seems to be a bit of a toss up. However, a majority of economists are anticipating a 25 bps rate cut to come in December. The latest Reuters poll here shows ~80% expecting the Fed to deliver one more rate cut by year-end.
Going back to the end of the shutdown though, what this means is that we’ll still have to wait for some time for the fog to clear up in terms of economic data clarity. Without concrete data for October – which might even include retail sales too – the Fed will still be guessing a fair bit going into next month. And that amount of uncertainty is something policymakers might find to be too much to be certain of another rate cut.
So, there will be a bit of a push and pull in figuring that out in the weeks ahead surely. For now, traders are still seeing all of this as perhaps continuing the pathway of softer US data. But only time will tell how the government closure has impacted the numbers.
Besides some minor softness in the dollar today, the aussie is the one leading gains with AUD/USD up 0.6% to 0.6578. And that owes to a much stronger Australian labour market report earlier in the day here. Still, the pair is caught in a bit of a bind in consolidating in and around 0.6400 to 0.6600 and weaving in and around the 0.6500 mark since June. And we are still very much in that range for now.
This article was written by Justin Low at investinglive.com.