USD mixed, CHF weakens on large SNB rate cut – Scotiabank

The US Dollar (USD) is mixed versus its major peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed versus majors as markets digest inflation data

“The DXY is showing a minor gain on the session, due to losses in the CHF after the SNB cut its policy rate a larger -than-expected 50bps, and a minor dip in the GBP. Note Brazil’s central bank raised the Selic rate hike a larger-than-expected 100bps (to 12.25%) late yesterday. Most other majors are steady to slightly firmer, however, with the AUD leading gains following a stronger than expected jobs report earlier (a 35.6k gain in jobs, led by full-time work, and a fall in the unemployment rate to 3.9% - against expectations of a rise to 4.2%). Short rates rose modestly and swaps have reduced the odds of a February RBA rate cut to a 50/50 shot.”

“US inflation data yesterday matched expectations but that was perhaps the limit of the good news. Core and underlying trend measures of inflation picked up and while these gains were modest, they do support the impression that the process of disinflation in the US has stalled. Markets added another couple of bps to anticipated easing at next week’s FOMC, effectively fully pricing in a 1/4-point cut and added marginally to easing expectations in 2025 but more hawkish-minded Fed policymakers will be taking note of core price trends and a cut next week may be accompanied by a more cautious-looking statement on the potential for rate cuts in 2025.”

“PPI data today may reflect moderate M/M gains but the consensus still expects a pickup in prices over the year. The BoJ’s Tankan survey for Q4 is released this evening and is expected to reflect steady, but relatively firm, business confidence into year-end. Rising business optimism supports the outlook for gradual BoJ tightening ahead.”