USD: Quiet start to a busy week on the calendar

The US Dollar (USD) is somewhat softer on the session as markets react to further upheaval in uncertainty in the Middle East, more signs from China’s politburo that it will step up efforts to bolster stimulus efforts and comments from President-elect Trump reiterating tariff and deportation plans once he takes office, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

DXY is flat, resisting the usual negative seasonal price trend

“Ranges among the major currencies are relatively limited outside of the AUD and NZD which head the overnight performance league with gains of 0.9% and 0.6% respectively on China growth hopes. The CNY is slightly firmer on the session. Friday’s NFP data showed a rebound in hiring in November but, even after revisions, the pace of job growth has slowed, supporting expectations that the Fed will cut its policy rate 25bps later this month.”

“Those expectations may be tested somewhat by this week’s US inflation data, however, with CPI forecast to reflect some persistent stickiness in prices. The USD’s reaction to Friday’s data was a classic payrolls move, with the initial move reversing and the DXY ending the day little changed. So far in December, the DXY is flat, resisting the usual negative seasonal trend in price. If anything, the index is still tracking close to the 2016 post-election profile which might mean a bit more USD strength in the short run if that pattern continues.”

“It’s a quiet start to a busy week on the calendar. There are no major data reports in North America to start the week. This evening’s RBA policy decision is expected to keep the cash rate on hold, with policymakers having indicated that it will be well into 2025 before they are likely to consider easing amid sticky core inflation pressures. Over the balance of the week, there are central bank decisions in Canada (cut), Brazil (hike), Peru (hold), Eurozone (cut) and Switzerland (cut).”

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