Last Thursday/Friday’s US data, where core inflation and 1-year inflation expectations declined, Q2 GDP was revised up, and personal spending increased, suggest that the US economy is on track for a soft landing. Such a scenario remains consistent with our no-panic, gradual pace of Fed tapering forecast – a 50bp cut for this year, starting in September, notes Christopher Wong, FX analyst at OCBC.
There are three scenarios for the US data.
“The US Dollar (USD) and markets may be more sensitive to a busy week of US labor market-related releases, including ISM employment data (Tuesday), JOLTs job openings (Wednesday), ADP employment, ISM services employment (Thursday), and the headline US payrolls report on Friday. Data interpretation may be tricky this time around, given that markets are already pricing in a very dovish outcome for the Fed this year (around 100bp cut; 31% chance of a 50bp cut in September).”
“We identify 3 possible scenarios: 1/ If US data is much better than expected. US stocks may recover, USD may rise while expectations of dovish Fed tapering may fade. 2/ If US data is much worse than expected. Then the view of a soft landing may be in doubt. US stocks are at risk of being sold off (remember the market crash of August 5). 3/ If US data is largely in line with estimates – neither good nor bad. This supports the soft landing story.”
“DXY was last at 101.66. Daily momentum turned mildly bullish but the rise in RSI moderated. We still see some risks of a further short squeeze but with a bias to fade rallies. Resistance at 102 (21 DMA), 102.20 (23.6% Fibonacci retracement of 2023 high to 2024 low). Support at 100.50 levels. A clean break puts focus on 99.60. US markets are closed today for the labor market holiday.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
