DXY ay enter into consolidation – OCBC

The US Dollar (USD) continued to hover near recent highs amid Trump policy uncertainty, a possible return to US exceptionalism and less dovish Fedspeaks. DXY was last at 106.55 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

DXY may enter into consolidation

“Overnight, Fed chair Powell said that the Fed does not need to be ‘in a hurry to lower rates’ and that the current strength of the economy allows it to approach decisions carefully. On labour market, he said ‘it is now by many metrics back to more normal levels that are consistent with employment mandate’.

“On inflation outlook, he spoke about near term fluctuation in recent range and to come down to 2% over time, albeit on a ‘sometimes bumpy path’. Markets have already scaled back probability of 25bp cut in Dec to 59% chance (vs 71% chance a week ago). Expectations will continue to adjust as US data comes. This puts focus on data tonight – empire manufacturing, retail sales, IP before next Fri’s prelim PMIs, Uni of Michigan sentiment data.”