USD: Dollar holds gains – ING
16.12.2024, 09:30

USD: Dollar holds gains – ING

It's Fed week, and the central bank is expected to cut its target policy band by 25bp to 4.25-4.50% on Wednesday. That is fully priced, and as our US economist James Knightley here, more interest will be had in how the Federal Reserve prepares to explain skipping its meeting in January, ING’s FX analyst Chirs Turner notes.

DXY can find support near 106.50/70

“New Fed forecasts should also reduce the number of expected rate cuts in 2025 to three from four. This is all currently priced by the market, but there seems little reason for the Fed to dovishly surprise this week and we see the dollar staying supported.”

“Additionally, tomorrow's release of November retail sales is expected to show healthy 0.4% month-on-month growth in the retail sales control group – suggesting US consumer habits are alive and well. But as seen in previous weeks, the dollar could also get dragged around by events overseas, where pressure looks likely to stay on the Chinese renminbi, and we should expect more rate cuts in Europe and elsewhere.”

“As a side note, we see the occasional references to the risk of another 1985 Plaza Accord to weaken the dollar. We take the view that 2025 will be more akin to 1983-1984, when more air was pumped into the dollar bubble. DXY should again find support near 106.50/70 and should push back above 107.00.”

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