It is business as usual now that US President Joe Biden and the US Congress passed a short-term stopgap measure and averted a government shutdown. This Friday’s US nonfarm payrolls and next Thursday’s CPI inflation are in play before the FOMC meeting on 1 November. Consensus expects US nonfarm payrolls to slow to 165k in September from 187k in August and headline inflation to slow to 3.6% YoY (0.3% MoM) in September from 3.7% YoY (0.6% MoM) in August.
Most of this week’s Fed speakers, including Fed Chair Jerome Powell today, share New York Fed President John Williams’s view that the Fed was at or near the peak level of interest rates. Fed officials want rates to stay restrictive for some time to bring inflation back to its 2% target. With other Developed Market central banks holding similar stances, the Fed has the highest policy rate in nominal and real terms.
Hence, we see DXY underpinned against its components. DXY closed above 106 for the first week since last November. According to the US Commodity Futures Trading Commission (CFTC), speculators amassed the largest net long USD positions since early March and the least net long EUR positions since October. This week, European Central Bank officials should push for its first pause at the governing council meeting on 26 October. Eurozone’s CPI estimate fell faster than expected to 4.3% YoY in September vs. the consensus for a decline to 4.5% from 5.2% in August. In early September, the European Commission predicted Germany’s recession would be worse at -0.4% vs. its previous -0.2% forecast in June.
USD/CHF has an upside bias between 0.9060 and 0.9440, its range in 1Q23. Tomorrow, Switzerland’s CPI and core inflation should stay inside its 0-2% target for a fourth consecutive month into September. The Swiss National Bank paused for the first time on 21 September in anticipation of subdued economic growth over the next few quarters. The State Secretariat for Economic Affairs (SECO) forecasts growth languishing at 1.1% in 2023 and 1.2% in 2024, below its long-term average of 1.7% from a strong CHF and weaker global demand, especially in Europe, hurting its export-driven economy.
Quote of the day
“Leaders are people who do the right thing; managers are people who do things right.”
Warren Bennis
2 October in history
South Korean President Roh Moo-hyun met North Korean Leader Kim Jong-il in North Korea for an Inter-Korean Summit in 2008.
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