Following Fed’s signalling for rate cut soon, the softer US payrolls report (last Fri) was the latest trigger to drag the USD lower, OCBC FX strategists Frances Cheung and Christopher Wong note.

Focus on ISM services on Monday

“NFP missed estimates (114k vs. 175k expected), hourly earnings dipped (3.6% vs. 3.9% prior) and unemployment rate rose (4.3% vs. 4.1% prior). We reiterate that recent thematic has also been a case of growth fears resulting in rise in vols, unwinding of carry and continued sell-off in equities. Renewed geopolitical concerns is also another risk to watch out for after US warned of a possible attack from Iran in retaliation for assassinations of top Hamas, Hezbollah leaders.”

“And we caution this may have some spillover effects onto other high-beta, risk sensitive FX. In a scenario of growth fears and geopolitical concerns, safe-haven proxy should remain in demand while carry trade should unwind further (as vols pick up), we favour expressing USD shorts via long JPY, CHF and gold. DXY was last at 103 levels.”