The United States Dollar is trading sideways today ahead of a slew of central bank meetings and economic data in the back half of this week.
Overview
Yesterday, we saw the release of December’s preliminary PMI data from the US, which is coming in largely stronger than expected. The manufacturing reading specifically was a touch soft, but the service sector and composite readings were substantially stronger than both market expectations and similar releases from the US peers around the world. Such a composite reading is the strongest out of the US since March of 2022 when the Federal Reserve began to hike interest rates. This morning, retail sales for November showed a mixed economic bag. The full month-over-month reading showed that retail sales grew by 0.7% in November, above economists’ expectations, but control groups excluding auto and gas prices grew less than expected, both at 0.2% monthly growth.
Data releases over the last two days, however, aren’t moving the needle for USD much ahead of the Federal Reserve’s interest rate decision tomorrow afternoon. While largely expected to cut interest rates by 25 basis points, traders are preparing for hawkish signals from Jerome Powell & company in the accompanying statement and press conference. US economic data over the last six weeks has skewed stronger overall than many expected, showing the continued resilience of the US economy, especially in comparison with its peers across the G10. Even the labor market, a point of concern for many Fed officials, has not slumped as much as many expected toward levels of employment that would cause concern about the Fed’s dual mandate of managing inflation without materially impacting labor markets to the downside.
The spotlight for the remainder of the week is not just on the Fed – the Eurozone and UK are also releasing inflation figures for November, the US will release the final reading of Q3 GDP, and the Bank of England and Bank of Japan will make interest rate decisions on Thursday. The Fed’s preferred inflation reading of PCE is also due out Friday morning.
What to Watch This Week…
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- FOMC Interest Rate Decision, Wednesday 2PM
- Bank of England Rate Decision, Thursday
- Bank of Japan Rate Decision, Thursday
- US GDP Q3 Final, Thursday 8:30AM
- US PCE Price Index, Friday 8:30AM
- Monex USA Online is always open
CAD ⇓
The Canadian Dollar is a big loser in the G10 this morning, trading roughly a quarter of a percent weaker against USD than at yesterday’s close. Canada’s finance minister, Chrystia Freeland, unexpectedly resigned yesterday morning, sparking renewed international concern over Canada’s ability to handle tariffs threatened by incoming President Donald Trump. This morning, Canada released inflation figures for November, which unexpectedly slowed to 1.9% annualized. Core inflation, however, was slightly above expectations, keeping CAD’s losses from such a reading muted.
GBP ⇑
The Pound Sterling strengthened slightly this morning against the Buck after UK labor data came in stronger than expected earlier today. Average weekly earnings grew 5.2% annually, compared with expectations for 4.6% growth. This has helped traders push easing expectations for the Bank of England further into next year. The BoE is widely expected to hold interest rates steady on Thursday, but concerns continue to mount over the nation’s economic health as growth readings have been decidedly lackluster over the last few months.
