USD: Holding pattern into tomorrow night's presidential debate - ING

The August US jobs report has failed to resolve the debate over whether the Federal Reserve will cut rates by 25bp or 50bp on 18 September. There's no doubt that it will cut at this point; Christopher Waller delivered one of his speeches on the economy on Friday, entitled 'The Time Has Come', repeating the phrase used by Chair Jerome Powell at Jackson Hole. That speech was quite equivocal, ING's FX strategist Chris Turner notes.

Kamala Harris and Donald Trump debate to move the USD

"While making the case that front-loaded (read 50bp) rate cuts could be appropriate if the data warranted, he seemed to be of the view that while the economy was still growing the case for aggressive rate cuts may not be there. After many gyrations, the USD and short-dated US yields are not too distant from where they started the day on Friday."

"In terms of US data this week, we have NFIB small business optimism tomorrow and the highlight of the economic calendar Wednesday when we see CPI for August. Another subdued 0.2% month-on-month is expected for core CPI. But potentially one of the biggest market movers this week is tomorrow night's US presidential debate between Kamala Harris and Donald Trump. Joe Biden's poor performance in the previous debate in late June presaged a swing in the polls towards Trump and a firmer USD."

"This all probably means the USD remains in a holding pattern for the time being. We have noted before that seasonal patterns tend to be positive for the USD in September - perhaps because of US corporate tax payment deadlines this month. And it seems it will now take an awful lot to see DXY break below 18-month lows near 100."