US Dollar (USD) recovered against most major currencies underpinned by an upward adjustment to US interest rate expectations. Fed funds futures trimmed odds of a December 10 rate cut to less than 50% as some Fed officials (Bostic, Logan, Schmid, Kashkari, Musalem, Hammack, and Collins) argued for caution on additional policy easing last week, BBH FX analysts report.

Hawkish Fed rhetoric lifts dollar, cuts odds of December easing

"Nonetheless, their comments aren’t surprising given their hawkish leanings, and some of them don’t vote this year but rotate as voters next year. Fed speakers today include: New York Fed President John Williams, Fed Vice Chair Philip Jefferson, Minneapolis Fed President Neel Kashkari (2026 voter), and Fed Governor Christopher Waller."

"The minutes of the FOMC October 28-29 meeting (Wednesday) should offer more details about the 'growing chorus' of Fed officials supporting skipping a cut. Regardless, the incoming backlog of US economic data will shed greater light on the state of the economy and matter more for near-term rate expectations. This week the highlight is the September non-farm payrolls report (Thursday), while the August data on construction spending (today), factory orders (Tuesday), trade balance (Wednesday), and September real earnings (Friday) take a back seat."

"Non-farm payrolls are expected at 50k vs. 22k in August, consistent with the breakeven pace of job gains (between 30k and 50k) required for keeping the unemployment rate steady. For reference, the ADP private employment fell -32k in August while Revelio labs non-farm employment (private and public) rose 33k. the decline in the hiring rate suggests labor demand is weak and points to downside risk to the NFP print."