Richard Franulovich, the head of FX strategy at Westpac, notes that a sectoral breakdown of the U.S. data surprises.

• “The preponderance of downside US data surprises are coming from the “business sector”, understandable given weakening global activity and related to that, elevated trade uncertainty, are transmitted primarily through corporate sector.
• Leading indicators suggest these prevailing divergent sectoral trends will intensify in coming months.
• The business sector likely continues to struggle.
• The weakness in labour demand indicators may prove to be an overshoot but taken at face value we may be on the cusp of a notably negative run of surprises.
• Historically there’s not much difference to the USD’s performance in the first few months of either an insurance easing cycle or a more notable easing cycle – the DXY tends to be resilient regardless. But, if the Fed goes beyond a “mid-cycle” adjustment and embarks on a genuine easing cycle the USD eventually capitulates, notching up an average 6%+ decline 9-12 months into the cycle. On the other hand if this proves to be a short series of insurance cuts such as 1995 and 1998 the DXY could find itself substantially higher in a few months.”