NFP Could Put Pressure on Other Central Banks Before Fed

U.S. economic strength is a boon for the dollar, and evidence of weakness may not prove much of an obstacle. The rally in the greenback is set to stay on course in either scenario, say strategists at Credit Suisse Group AG.
The dollar has gained against major peers since Sept. 17, when the Federal Reserve kept its target rate near zero. For a hint at the currency’s path forward, traders are fixated on Friday’s release of September U.S. jobs figures.

Data showing a robust labor market stand to bolster the dollar as traders ramp up bets the Fed will lift its benchmark rate this year. Yet the opposite result, where expectations for a 2015 increase fade, may not derail the greenback, Credit Suisse analysts said in a note Wednesday. That’s because signs the world’s biggest economy is cooling may help spur the European Central Bank and the Bank of Japan to keep adding monetary stimulus, undermining the euro and yen.

“A weaker U.S. adds to the theme of weaker global growth generally, and the focus then goes to which central banks feel the most pressing need to do something in response to that,” said Shahab Jalinoos, the New York-based global head of foreign-exchange strategy at Credit Suisse. The bank placed fourth in Bloomberg’s third-quarter foreign-exchange rankings, after topping the list the prior quarter.

The Intercontinental Exchange Inc.’s Dollar Index, which tracks the U.S. currency against six major counterparts, rose 0.9 percent in the third quarter. The index is up 1.7 percent since the Fed’s September decision.

Via Bloomberg Business

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza