The Dollar Index (DXY) briefly traded above 108 on Friday, although this was primarily a euro rather than dollar-driven move, ING’s FX analyst Chris Turner notes.
“Recall the euro has by far the largest weight in the DXY at 58%. The dollar trend is a little more settled and news over the weekend confirms that Scott Bessent has been picked as the next US Treasury Secretary. We are not sure whether the recent bullish flattening in the US Treasury curve represents the market seeing him as a 'safe pair of hands', but he certainly does not sound like someone who will be pushing President-elect Donald Trump into weak dollar policy.”
“Looking ahead in this US Thanksgiving-shortened week, the highlights of the US data calendar will be Tuesday's release of the Federal Reserve's November FOMC minutes (where the central bank cut rates by 25bp) and Wednesday's release of the core PCE deflator for October. The latter is expected at a little sticky 0.3% month-on-month and will keep the market guessing over whether the Fed will cut in December after all. Currently the market prices 14bp of a 25bp rate cut.”
“Currently, our team are still going for a 25bp Fed cut in December and combined with positioning and seasonal dollar weakness may now offer some headwinds to the DXY. It looks like geopolitics and the diverging US-eurozone macro story will keep the dollar bid into year-end after all. DXY could start to consolidate in a 106.50-107.50 range this week, but the bias remains higher.”
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