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Dollar faces near term downside risks as US data shapes rate bets

ING says implied odds for an October rate hike are above 50%, with markets watching September payrolls and August PCE.

Reported · Written up by our desk · Major Pairs

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner said the US dollar faces near term downside risks after a strong rally, as incoming US data is expected to drive October FOMC rate expectations.

They pointed to upcoming US labor data and August PCE as key catalysts, noting that markets are seeking fresh evidence of US economic strength to support expectations for a 28 October rate hike.

ING said current pricing for the October move is about 16 basis points, after peaking at 19 basis points last week, and said a hot jobs report could lift hike pricing above 20 basis points.

The strategists expect consensus September payrolls of 90,000, but flagged risks of downward revisions to August’s 162,000 print, adding that they expect implied probability for an October hike to remain above 50% even as markets look for clarity.

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