Dollar's Secondary Focus on Employment as Main Agenda Turns to US Elections
Global markets are focused on the US employment data for October, scheduled to be released today at 15:30 GMT. Mohamad Al-Saraf from Danske Bank indicated that these figures could lead to a "modest" increase in the dollar, while noting that investors' attention is shifting towards the upcoming US presidential elections next week. According to The Wall Street Journal, economists expect an increase of 100,000 new jobs in October, down from 254,000 in September. Al-Saraf mentioned that the data might be distorted due to extreme weather conditions, suggesting that the impact may be limited.
The US will witness one of its most contentious races in history with the presidential elections starting on November 5. The elections, which will be monitored overnight from November 6, are expected to hinge on the battleground states between Republican candidate Trump and Democratic candidate Harris. Polls in states like Pennsylvania, Wisconsin, Michigan, North Carolina, Arizona, Nevada, and Georgia indicate that Trump is leading in some regions while Harris is ahead in others. These battleground states, which were won by Democrats in the 2020 elections, have the potential to change the outcome this year.
Macroeconomic indicators and market expectations have reaffirmed the resilient nature of the US economy. However, markets are maintaining the expectation of a 25 basis point rate cut during the Fed's meeting this month.
The dollar index (DXY) has been on a downward trend since the beginning of the week but is showing signs of recovery today as it returns to the 104 range ahead of the Non-Farm Payroll data. Last month, the non-farm payroll increase was recorded at 254,000, while this month it is expected to be 101,000. The unemployment rate is projected to remain steady at 4.1%, with average hourly earnings expected to see a slight slowdown at 0.3%.
Geopolitical developments continue to influence the markets. Reports of potential Iranian attacks on Israel had previously moved Brent crude prices, but the market is currently showing a calmer trajectory. Some commentators believe that the US elections and geopolitical uncertainties could increase risk perception in global markets, putting pressure on the dollar. As a result, investor attention is now directed towards the election outcomes and potential macroeconomic impacts.