Talking Points

US Dollar Recovers Amid Correction Following Last Week’s Selloff
Yen Underperformed on Fading Safe-Haven Demand as Nikkei Rose
All Eyes on Tuesday’s US Jobs Data as Markets Time QE “Taper”

The US Dollar launched a corrective recovery to start the trading week, rising as much as 0.2 percent on average against its leading counterparts. The move likely reflects corrective profit-taking in the wake of last week’s explosive selloff in the wake of a Congressional deal to end the US government shutdown and lift the so-called “debt ceiling”. The Japanese Yen underperformed, dropping as much as 0.5 percent against the US unit amid fading haven demand as the Nikkei 225 advanced.

That decline itself was probably driven by profit-taking: most market participants likely expected a deal to be struck because the alternative (a US default) appeared unthinkable given the greenback’s status as the global reserve currency. After the accord was in place, uncertainty flared up anew as the spotlight turned to a two-week backlog of US economic data. With this in mind, a relatively quiet calendar in European and North American trading hours is likely to see investors looking ahead to Tuesday’s release of September’s US Employment report.

Although the data is dated in that it won’t reflect the shutdown’s impact, it will help establish a baseline to gauge how ready to act the Fed had been going into October. Supportive news-flow hinting at a modest delay to the “tapering” process stands to boost the US Dollar against most of the majors. A soft outing that suggests the case for a near-term stimulus reduction was already precarious before October’s budget fiasco stands to have the opposite effect.

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