The dollar has started the week higher, continuing Friday’s post-Nonfarm Payrolls rally (minus the volatility). On Friday the U.S. dollar index had multiple swings between a 0.81% high/low range as traders parsed the jobs data. Judging by the dollar’s eventual strength it appears there was not enough evidence of labor weakness to warrant a 50 basis-point cut at the FOMC’s policy meeting next week.
The dollar index is +0.42% today in a broad rally vs. most majors. Notable dollar gains are +0.70% vs. CHF and +0.65% vs. JPY, a shift away from the traditional safe-havens. The dollar’s primary decline is a 0.39% drop vs. the Mexican peso, another clue of shifting sentiment back to a ‘risk-on’ market stance.
U.S. Treasury yields are higher in all tenors with the two-year leading gains up 0.033%. Market pricing implies a 100% likelihood of a 25 basis-point cut on September 18th.
Global equities are higher with the three primary U.S. equity indexes set to begin today’s session +0.70%.
Mexican President Obrador’s Morena party is one vote short of the 86 needed to pass its constitutional judicial reform in the Senate. The reform would establish that all federal judges be elected by popular vote, seen as a maneuver to control the one institution that could check the Morena party’s power.
Separately, Mexico’s central bank (Banxico) is expected to announce its second consecutive rate cut at its September 26th policy meeting. Inflation has been declining as expected, allowing room for another cut. A 25 basis-point cut would bring the policy rate to 10.50%.
This week’s U.S. economic calendar includes August Consumer Price Index on Wednesday and Producer Price Index on Thursday.
