The U.S. dollar index has been rejected at the first attempt to get above the 100 level.
USDX – Daily Chart
The U.S. dollar has been surging from the September lows, and the rally has hit resistance ahead of the key 100 level.
The U.S. dollar was under pressure after inflation fell more than expected, driven by the largest drop in rents in 15 years.
“The weakness in the rental market right now is alarming. Suggests there’s much more deflationary pressure in housing/economy than people understand,” analysts said.
The data could improve the chances of a rate cut in December, and the dollar is softening. With the government shutdown set to end, analysts will also get a more detailed look at the struggling jobs market.
ADP labour market data released on Tuesday showed a decline of 50,000 in private-sector employment over the past four weeks. The reopening of the government will trigger an avalanche of economic releases delayed by the shutdown, including the more important NFP jobs report.
“We’re going to be getting a fresh round of data dumped on us after a quiet period, so I think there’s a lot of potential for movement,” said Eric Theoret at Scotiabank.
Federal Reserve Chairman Jerome Powell said last month that a cut at the central bank’s December meeting is not certain. He said policymakers were divided over whether to continue easing policy amid elevated inflation. Further proof of deflationary indicators could lead to another rate cut by year-end.
