The dollar is rising as investors continue to assess whether Tuesday’s big drop was the start of something significant or just more noise in an uncertain environment. We’ve heard from a couple of Fed spokespersons that they still maintain the risk of another hike, but for now, US money markets seem pretty confident that the Fed cycle is over and have now discounted 90 basis points. of flexibility in 2024. US October retail sales release failed to ignite this week’s dollar bearish trend and the Senate’s support for a stopgap funding bill has eliminated the risk of a bearish dollar government shutdown at midnight on Friday.
Where does that leave us? Confidence that the Federal Reserve’s tightening cycle is over should be positive for the rest of the world’s currencies, especially those that are very sensitive to higher interest rates. However, with US overnight rates at 5.4%, the dollar is an expensive sell and the bar is high to invest elsewhere. Therefore – aAs we conclude our 2024 Foreign Exchange Outlook: Waiting for the tide to rise – The dollar bearish trend will take some time to develop and its most intense period may not be until 2Q24.
For today, the focus will be on weekly jobless claims data and industrial production. Any increase in jobless claims could weigh on the dollar. We also have some speakers today from the Federal Reserve, mostly on the hawkish side of the spectrum.
Look for DXY to trade in something like a 104.00-104.85 range in the short term.