Investors’ focus turns to the November payrolls report and a speech by Fed Chairwoman Yellen.
When it comes to the labour market, we expect conditions to continue to improve as also indicated by expanding business activity. It must be noted too that only a considerably weaker than expected outcome would have any meaningful impact on investors’ central bank rate expectations. However, as such an outlook is already largely priced in it will depend on the expected rate path to drive the USD further.
Unless growth momentum accelerates from the current levels it will likely remain a key notion that the Fed will consider a dovish hike. This is especially true should a stronger currency start to dampen medium-term inflation expectations. As such It cannot be excluded that there will be a stronger focus on the currency up ahead. In that respect there will be some focus on a speech by Fed Chairwoman Yellen this week.
Although we expect the USD to remain supported, we believe that downside correction risk has been rising considerably of late.
