DXY Slides on Weak Labor Data

The dollar index slipped to about 99.4 on Tuesday as softer US labor signals and rising odds of Fed easing reduced demand for the greenback.

ADP’s high frequency series showed private employers shedding roughly 11,250 jobs per week in the four weeks to October 25, a run of losses that pushed markets to price about a two thirds probability of a December rate cut and narrowed expected short term rate differentials versus major peers.

The euro and the yen strengthened as the ECB is widely expected to hold policy steady and as Japan’s recent FX and policy moves left the yen more competitive.

Meanwhile, progress in Washington toward a deal to reopen the government will restore official data flows and unwind the exceptional safe haven bid that supported the dollar during the shutdown, reinforcing the currency’s pullback.