FX Daily: Data back in the driver’s seat this week
At a Glance
The desk anticipates increased volatility in the USD as crucial economic data emerges this week, potentially influencing Federal Reserve rate expectations. Per the full note, a consensus expectation of 90k non-farm payrolls could significantly impact market sentiment, particularly should it reflect any upside surprises that bolster USD rate hike pricing beyond the current 16bp. As recent movements in the AUDUSD and EURUSD indicate, the data-driven sentiment may create headwinds for a sustained dollar rally, with analysts projecting stabilization in the currency ahead of key releases, such as the August payrolls on Friday.
Key Takeaways
- 01Fresh US economic data expected to drive currency movements this week.
- 02Key jobs figures may significantly influence rate hike pricing for October Federal Reserve meeting.
- 03Expectations for USD to stabilize, particularly against AUD and EUR pairs.
- 04Watch for August payroll revisions that could upset current dollar momentum.
Full Analysis
What the desk is arguing
The desk believes that US economic data will play a pivotal role in the dollar's trajectory this week, particularly with job figures coming in September. The note highlights that while market pricing for the October rate hike currently stands at 16bp, further labor market strength could push this expectation higher, which weighs on the dollar's recent momentum.
Recent Fedspeak, along with Brent crude prices remaining supported above $100/bbl, enhance the need for robust datapoints to solidify the dollar's current positioning. Analysts note that any significant upward revisions to the August jobs figure, which was initially reported at 162k, would exacerbate this relationship.
Where it sits in our coverage
For AUD, our current spot is 0.6886 with a consensus target of 0.7100, ranging from 0.6600 to 0.7300. Firms with relevant forecasts include: - tmgm: Dec-26 target at 0.6900 - scotiabank: Dec-26 target at 0.7500 - rbc: Dec-26 target at 0.7000
This view is broadly aligned with the consensus, with various firms coalescing around a middle ground. However, the tmgm forecast is slightly more cautious in comparison to the higher Dec-26 targets from scotiabank, indicating divergence in outlooks.
How other firms see it
Several firms align with the view of potential upside pressures on the USD in light of conflicting economic signals, including morganstanley and rbc. In contrast, socgen diverges, advocating for a potential slowdown in USD strength based on alternative data interpretations.
The dynamics in EURUSD could also be influenced by upcoming ECB considerations, particularly regarding policy shifts and easing expectations that mirror the ongoing debates surrounding US monetary policy. Maintaining a close eye on both pairs' interdependencies remains essential in this shifting landscape.
Market Implications
Traders should monitor the October rate hike pricing, particularly any movements above 20bp driven by strong labor data. Additionally, August payroll figures on Friday will serve as a critical benchmark for USD strength against both AUD and EUR.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 0.7000 |
Danske Bank | Bearish | 0.6800 |
UBS | Bullish | 0.7300 |
From the original
Articles FX Daily: Data back in the driver’s seat this week Published 07:22 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Markets will look for fresh evidence of a hot US economy from this week as September figures start to flow in. Upside surpri
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