The US Dollar (USD) remains well supported this December as trading partners move to cut interest rates quite quickly. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading, ING’s FX analyst Chris Turner notes.
“Canada has now delivered back-to-back 50bp rate cuts and central banks in Europe could deliver cuts of a similar magnitude today. At the same time, a raft of source stories in Japan suggest that the Bank of Japan will not be hiking next week after all. That is helping USD/JPY up to the 153 level. And yesterday morning the dollar also got a bid from a source report that China is considering a softer renminbi.”
“Back to the US domestic story, there were no real surprises in yesterday's CPI data and the market has firmed up its view that the Fed can cut by 25bp next week. This move will be characterised as the Fed taking the opportunity to deliver less restrictive policy while it can. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading. Any upside surprise – and what it means for next Friday's release of the core PCE deflator – could prove a minor dollar positive.”
“We see no reason to leave the safety, liquidity and high yield (one-week deposit rates at 4.55% p.a.) of the dollar and DXY risks a move towards 107 if the ECB is sufficiently dovish today.”
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