US Dollar: Weak momentum faces midterm and payrolls tests – DBS

DBS analysts characterize the US dollar's recent weakness as momentum-driven and vulnerable to near-term event risk, namely the upcoming US midterm elections and the next nonfarm payrolls report. The transmission channel runs through rate expectations and risk sentiment: a softer payrolls print would reinforce bets on Federal Reserve easing and narrow the rate differential that has supported the greenback, while election-related fiscal and trade uncertainty can shift term premia and safe-haven demand. Dollar-sensitive assets are most exposed, including major FX pairs such as EUR/USD, GBP/USD and USD/JPY, as well as dollar-denominated commodities like gold, where a weaker currency typically lifts prices. Traders should watch the nonfarm payrolls release and the accompanying wage growth and unemployment figures, since a surprise in either would test whether the dollar's current downward trend can persist into the midterm period.

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