It’s not unusual for the highly efficient FX market to be more forward-looking than other asset classes. In this case, it appears that the US Dollar (USDD) is embedding the narrative that the US reopening will lead to softer data and a dovish Fed repricing, ING's FX analyst Francesco Pesole notes.

US Dollar fits a bearish view

"This has been our view for a while, but we must admit that the bar for a December cut has risen when hearing Fed officials. Yesterday, Neel Kashkari stressed evidence of 'resilience in economic activity, more than I had expected', and kept his options open for December. Hammack and Musalem (who are generally hawkish) suggested we are close to neutral and the room for more cuts is limited."

"One important development yesterday was the announcement by Kevin Hasset (Director of the National Economic Council and Fed Chair candidate) that September’s jobs numbers should be released – potentially next week – but without the unemployment rate. In our view, this suggests that the Administration doesn't want the Fed to use a lack of data as an excuse not to cut rates in December."

"While the move in the dollar fits our bearish view, it feels a bit premature and at risk of rapid reversal should the initial batch of US data prove not as bad as seemingly priced in."