(10 January 2020)DAILY MARKET BRIEF 1:Dollar set for a bullish turn

All conditions seem united for allowing the greenback to appreciate further short-term. Easing Middle East tensions combined with both the state visit of Chinese Vice Premier Liu He to sign the interim trade deal in Washington due next week along with upbeat labor data releases on Friday should put the greenback on track to post its strongest weekly gain in two months after a two-week session loss. Meanwhile, US elections due in November 2020 should take center stage, with caucuses in Iowa, Nevada and South Carolina kicking off in February as hopes of a doubling of Chinese purchases of US agricultural products in 2020 are tempered by large forward purchases of Brazilian soybeans and the suspension of China's plan to produce ethanol-blended gasoline, negative news for Trump's agricultural electorate.

Although it is expected to post a rather soft expansion reading, after an overly excessive increase of nonfarm payrolls in November of 266’000, job growth should stay firm and above a weak reading of 100’000, with expectations along 160’000 following positive ADP employment figures in the corresponding month. Furthermore, both unemployment and wage growth should stay flat at 3.50% and 3.10% respectively, supporting the Fed members’ view that US economic conditions remain optimistic, albeit downside risks related to growth and inflation should be cautiously monitored. Accordingly, adverse surprises on the economic data front could potentially support the view that additional monetary policy easing is on its way as markets anticipate a further rate cut at the earliest in 3Q 2020.