US Dollar (USD) is trading on the defensive and holding above its 200-day moving average. We get some second-tier US jobs check today with the ADP weekly employment preliminary estimate (1:15pm London, 8:15am New York) and sub-components of the November Conference Board consumer confidence index (3:00pm London, 10:00am New York), BBH FX analysts report.

September retail sales and PPI could influence dollar outlook

"Last week’s ADP report showed that for the four weeks ending November 1 private employers shed an average of -2,500 jobs a week, indicative of weak labor demand. In October, the Conference Board consumer report offered mixed readings on the labor market. The labor differential index (jobs plentiful minus jobs hard to get) improved slightly but consumers were more worried about the labor market outlook over the next six months."

"US September retail sales and PPI data are also due today (both at 1:30:pm London, 8:30am New York). The retail sales control group used for GDP calculation is projected at 0.3% m/m vs. 0.7% in August. Retail sales activity has held up well in the three months to August, growing at an above trend pace. However, the slowdown in labor demand points to looming pressure on household incomes and future consumption."

"We expect the Fed to deliver a follow-up 25bps cut to 3.50%-3.75% in December (77% priced-in) because restrictive Fed policy can worsen the fragile employment backdrop and upside risks to inflation have lessened. USD will likely consolidate recent gains ahead of the December 10 FOMC rate decision. But narrowing US-G6 rate differentials suggests the path of least resistance for USD is down."