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According to analysts at Westpac, the broad US Dollar sell-off is getting triggered by Brexit hopes and US-China trade war hopes throughout the broader markets, and Friday’s NFP will be the key reading to round out the trading week.

Key highlights

The broad US dollar selloff that began in Asia deepened in Europe and US trade. Catalysts included a sterling surge on hopes of a Brexit deal this month and a reported thaw in US-China relations over trade. The Chinese yuan led Asian FX gains. AUD/USD was also supported by strong trade data as it hit 4 week highs above 0.72. Today we see Australia Sep retail sales while the global focus is US Oct employment.

The US dollar suffered its largest daily fall in over a year. Against some currencies, specific factors appeared to be in play, but otherwise it appeared to be a squeeze on bullish dollar positions. USD had already fallen substantially when President Trump tweeted that he had spoken to China’s President Xi about trade, with discussions going “nicely” ahead of the G20 meeting at the end of this month. USD/CNH had already fallen from 6.98 to 6.9370 at this point, then continued its fall to 6.9130.

Australia’s busy data week continues at 11:30am Syd/8:30am Sing/HK with Sep retail sales and Q3 producer prices. The latter is of little interest given we have already seen CPI. Consensus on nominal retail sales is 0.3%mth, with Westpac on 0.2%. Employment and population growth are supportive but consumer sentiment and house prices could weigh. Inflation-adjusted sales were very strong in Q2, up 1.2%qtr, so we agree with consensus for a far more muted 0.4%.

Headline US non-farm payrolls remain very prone to volatility from the series of hurricanes to hit southern states in recent months. Bloomberg consensus for Oct is 200k, with +/- 1 standard deviation ranging from 171k to 220k. It is probably more instructive to look at the unemployment rate (expected to hold at 3.7%) and average hourly earnings, seen up a modest 0.2% in the month but base effects helping the annual pace break higher, from 2.8% to 3.1%yr. This would be a high since April 2009.