Monday’s composite PMIs were generally stronger than expected across main developed markets, although there were clear signs of softening in manufacturing on both sides of the Atlantic. Market pricing is firm on a 25bp cut on the upcoming FOMC meeting, which is also the overall consensus, ING’s FX analyst Francesco Pesole notes.
2-year USD OIS rate around 4.0% keeps USD from correcting
“The currency market isn’t drawing many conclusions in monetary policy terms and dollar crosses seem to be settling in the latest ranges ahead of the last big week of macro events before the year-end recess.”
“In the US, we’ll see retail sales for November today, and expectations are for a robust read – which should, however, have little bearing on tomorrow’s FOMC communication, given some volatility and distortion still in the data due to the impact of extreme weather events. Market pricing is firm on a 25bp cut, which is also our call and consensus.”
“We think something of a wait-and-see approach could dominate today and favour a further consolidation in the dollar’s latest gains. Ultimately, unless the Federal Reserve signals a more dovish path than the market implies (and we don’t think it will), a 2-year USD OIS rate around 4.0% remains the key counter-seasonal factor keeping the dollar from correcting meaningfully in the generally soft month of December.”
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