USD slips on fed outlook – Scotiabank

The US Dollar (USD) started off December pretty much like it finished November—on the up—despite typically unfavourable trends for the USD overall in the December month, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Waller says he’s leaning towards a December cut

“I noted yesterday that weak seasonality for the DXY was reflected in an average return of just over –1% for the month over the past 25 years. Trading so far today sees the USD edging a little lower against most of its major currency peers, however, with dovish Fed comments yesterday (Governor Waller stating that he was ‘leaning’ towards a rate cut later this month) weighing on USD sentiment. Swaps moved to price in a little more easing risk for the December 18th meeting following those remarks (18bps of cuts priced into the December contract this morning).”

“Currency gains are limited, however; the EUR is edging towards the top of the overnight performance table, with a 0.2% gain on the USD. The JPY is underperforming and is down 0.3%. Asian and European (including French) stocks are modestly higher but US equity futures are fractionally in the red. Global bonds are mostly lower (except French OATs which are outperforming marginally).”

“Very modest USD losses leave the DXY looking a little more neutral and rangey on the short-term charts. Gains may be blocked above 106.50 for now, with the dollar’s broader undertone liable to weaken a little more below 106 on the index. Key support currently sits at 105.50. On the data front, it’s all about jobs today with the JOLTS data. ADP figures drop tomorrow ahead of Friday’s payrolls. Fed speakers include Kugler and Goolsbee.”