As the US federal government prepares to reopen and release a backlog of economic data—including the nonfarm payroll report—traders are rushing to hedge against potential dollar volatility. The cost of one-month options tied to the dollar spot index has climbed to its highest level in nearly a week.
On the evening of November 9, the US Senate advanced a stopgap funding bill in a procedural vote, securing the 60 votes needed to move forward, bringing an end to the record 40-day government shutdown closer. The bill still requires final Senate approval, House passage, and President Trump's signature—a process expected to take several days. However, uncertainty remains over House approval, with Democrats yet to reach consensus.
Wells Fargo strategist Aroop Chatterjee noted that while September's backlogged survey data will be released first, more timely economic updates may not arrive until early December as agencies resume operations. This data delay could influence the Fed's December 10 policy decision. Market expectations for another 25-basis-point rate cut in December have faded since Chair Powell stated such a move was not "a done deal."
Morgan Stanley suggests the data blackout may have masked structural hiring slowdown signals, inadvertently supporting the dollar, which posted its second-best monthly gain this year during the October shutdown. Consequently, dollar volatility—typically spiking around major data releases—had declined, with JPMorgan's G10 FX volatility index hitting a one-year low in late October. The gauge has since rebounded as traders anticipate currency swings ahead of the Fed meeting and data deluge. On Monday, the dollar index dipped slightly, extending losses to a fourth session.
Key analyst views: - **Brown Brothers Harriman (Elias Haddad):** "A wave of volatility is likely as backlogged data rolls out. Resilient figures would boost the dollar, while weak data could revive December rate-cut bets and pressure the currency." - **ING (Francesco Pesole):** "We see downside risks for the dollar. Jobs data may reinforce the case for further cuts, including December, reigniting dollar weakness." - **CIBC (Sarah Ying & Noah Buffam):** "Labor market soft spots, combined with technical volatility from delayed releases, may repricing December cut expectations—especially if data disappoints—weakening the dollar. However, significant equity sell-offs could spark a dollar rebound, overriding fundamentals." - **Bank of America (Alex Cohen):** "The dollar's near-term path hinges on whether data convincingly supports a December cut. Powell's 'not a done deal' stance means evidence must be compelling—I'm not yet seeing it in alternative indicators." - **RBC (Richard Cochinos):** "Historically, dollar strengthens with US growth acceleration. Post-shutdown, decent labor data could briefly reinforce dollar strength." - **Spectra Markets (Brent Donnelly):** "FX volatility should pick up modestly. Given recent Fed rhetoric, markets are prone to price out December cut expectations depending on data."
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