Dollar firms ahead of U.S. economic data

The dollar regained its footing in Asia trade on Monday ahead of the releases, reversing some of its losses from last week

The dollar firmed slightly on Monday as investors braced for the release of a slew of U.S. economic data following the end of the government’s shutdown, hoping it will add clarity to the central bank’s interest rate decision in December.

Market reaction to U.S. President Donald Trump’s tariff U-turn on more than 200 food products was muted, with some analysts saying the move was not a surprise due to the cost-of-living issues caused by the levies.

Sterling remained under pressure following a whirlwind Friday session as speculation swirled around the UK government’s highly anticipated November 26 budget.

The safe-haven Swiss franc pulled back from a one-month high and last stood at 0.7954 per dollar, having found support last week from jitters over a selloff in global stock markets.

U.S. data releases will also be in focus this week for clues on the health of the country’s economy, with the closely watched September nonfarm payrolls report due on Thursday.

We have had a data vacuum for over 40 days, so I think markets will be super interested in any new information about the U.S. economy, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

I think the risk is definitely skewed to weaker payrolls print, and that would just reignite market expectations about a December FOMC rate cut and send the U.S. dollar down, Kong said.

The dollar regained its footing in Asia trade on Monday ahead of the releases, reversing some of its losses from last week, with the euro softening 0.2% to $1.1597.

The Australian dollar dropped 0.24% to $0.6521 and the New Zealand dollar shed 0.18% to $0.5670.

The dollar index gained 0.14% to 99.46.

Markets are now pricing in just over a 40% chance of a 25-basis-point rate cut in December, down from more than 60% earlier this month.

However, that hasn’t substantially lifted the dollar, which last week was caught up in a broad selloff alongside U.S. stocks and bonds.

Thierry Wizman, global FX and rates strategist at Macquarie Group, said the currency’s weakness reflects “speculative traders closing long U.S. dollar positions ahead of heightened volatility”, in anticipation of the data deluge in the coming few weeks.