Week Ahead – Dollar shines ahead of nonfarm payrolls
XM Group | Sep 29, 2023 08:02AM ET
- Dollar cruises higher, nonfarm payrolls on Friday will be crucial for this rally
- Early indicators point to another solid month for the US labor market
- Central bank decisions in Australia and New Zealand will also be in focus
Dollar goes on a rampage
The US dollar rally has gone into overdrive lately. Empowered by a stunning rise in US yields, solid economic fundamentals, and safe haven flows, the dollar has charged higher to record 11 consecutive weeks of gains against the euro.
In a nutshell, the United States appears much more resilient than any other region. Incoming data releases continue to reaffirm the strength of the US economy, while in contrast, Europe is suffering a sharp slowdown in economic growth and China is still dealing with the implosion of its property sector.
This differential in economic growth is increasingly pushing investors towards the United States, and the impressive rally in US yields lately has made the dollar even more attractive from an interest rate perspective.
That said, there’s an election in two weeks, so the risk is that the RBNZ does not deliver any clear signals, to avoid interfering. Either way, the general outlook for the kiwi dollar seems grim, even if the currency spikes higher after the RBNZ. The slowdown in global growth and the deterioration in risk sentiment will likely keep a lid on any rallies.
Chinese data releases will be in focus too. China is the largest trading partner of both Australia and New Zealand, so these currencies are very sensitive to developments in China, where the latest business surveys will be released over the weekend.
Elsewhere, Japan’s Tankan business survey for Q3 will hit the markets on Monday, while in Canada, the employment report for September will see the light on Friday.
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