Synopsis:

Credit Agricole anticipates that the US dollar (USD) may strengthen further, influenced by evolving market dynamics and upcoming economic data.

Key Points:

• Current Market Dynamics:

  • The USD has potential for recovery, although US rates markets have already adjusted their Fed rate cut expectations to approximately 50 basis points for this year. Current market pricing aligns with Credit Agricole's views, indicating that some Fed-related positives are already factored into the currency's value.

• Triggers for USD Strength:

  • To see further gains, additional positive surprises in US economic data or increased global risk aversion would be necessary. This highlights the dollar's sensitivity to both domestic economic indicators and global market conditions.

• Geopolitical Considerations:

  • The ongoing situation in the Middle East is critical as it affects global financial conditions and risk sentiment. Additionally, the upcoming US presidential election adds another layer of uncertainty that could influence market behavior.

• Focus on Upcoming Data:

  • Attention will be on the US retail sales figures for September and upcoming comments from Federal Reserve officials (Fedspeak). These elements are expected to play a significant role in shaping market sentiment and the USD's trajectory.

Conclusion:

Credit Agricole sees the possibility of further USD gains, contingent on upcoming economic data and geopolitical developments. The focus on retail sales and Fedspeak this week will be crucial in determining the dollar's strength amid shifting market conditions.