The US Dollar (USD) is trading mixed to slightly firmer as markets consolidate in quiet trade following the break in North American trading yesterday, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets balance soft ADP jobs. vs. govt. reopening

"The USD’s slide extended Tuesday around weekly ADP jobs data showing a fall of 11.5k in private sector jobs on average over the past month. Hopes for an end to the government shutdown continue to buoy broader sentiment, with global stocks broadly higher. Treasurys are outperforming, reflecting the soft jobs implications of the ADP data to some extent. Estimates suggest that the delayed NFP data could be released within 2-3 days of the US government reopening which would give the USD and markets more generally a little more directional certainty perhaps."

"Broader FX trends are mixed on the session thus far. The JPY is unperforming and nearing 155, prompting the Finance Minister Katayama to warn markets that sharp, “one-sided” FX moves are being watched with a “high sense of urgency”. UK markets are under a bit of a cloud broadly following speculation about a challenge to PM Starmer’s leadership. There are no data reports today but we get another volley of Fed speakers, most (Williams, Paulson, Waller and Miran) with dovishleaning credentials. Governor Miran has already been on the airwaves this week advocating for a 50bps cut in December."

"WSJ Fed-watcher Timiraos notes that Fed officials are “fracturing” over a December rate cut after inflation hawks pushed for a pause after last month’s decision. President Trump remarked Monday that US inflation would hit 1.5% “pretty soon” which likely reflects his desire for the Fed to cut rates. But reaching sub-2% inflation soon seems unlikely. A drop to even 2% inflation by early 2026 (for example) would require a consistent run of 0.1% M/M increases (or better) in headline CPI."