The dollar has entered a consolidation phase, but yesterday’s price action gave us an idea of what could be more regular price action in 2024. Initial US claims were a little stronger than expected. Expected, the US 2-10 year bullish yield curve steepened by 3-4 bps and DXY sold off around 0.4%. This is the type of price action we expect to see more often next year, as tight rates in the United States finally catch up to the U.S. economy and employment trends begin to deteriorate. Before that, however, the currency market will see US two-year bond yields bounce into a range of perhaps 4.75-5.00% and drag the dollar down with it.
Today, the focus will be on US housing construction and another group of speakers from the Federal Reserve. Recent Fed speakers have barely moved the needle on expectations for the Fed’s policy cycle, and instead it has been the data that has done the talking. Perhaps the next big opportunity for the Fed’s speech will be the release of the minutes from the Nov. 1 FOMC meeting (minutes will be released next Tuesday). DXY may trade well in a tight range of 104.00-104.85 before then.