The US Dollar (USD) is showing slight gains as it approaches the 99 mark, but it continues to experience losses throughout the week. According to insights from Scotiabank”s Chief FX Strategists Shaun Osborne and Eric Theoret, the broader sentiment indicates a potential consolidation of these losses within the DXY index.
Despite marginal gains, the overall movement in foreign exchange markets remains subdued as traders await the Federal Reserve”s upcoming decisions. The Fed is set to meet, although policymakers will be without the delayed Non-Farm Payroll (NFP) data during their deliberations on rates, scheduled for Wednesday”s Federal Open Market Committee (FOMC) meeting. Recent private sector data for November has already confirmed a slowdown in the US labor market.
The ADP report indicated a reduction of 32,000 in private non-farm payrolls, while the Revelio PLS series showed a decline of 9,000 in hiring. Although these figures may not directly correlate with the official NFP data on a month-to-month basis, the overarching trend points towards a continued weakening of labor demand, likely supporting the anticipated 25 basis points rate cut.
In addition, this morning”s delayed September Personal Income and Spending as well as Personal Consumption Expenditures (PCE) data are expected to reveal a modest increase in spending and income levels. Analysts predict a slight decline in Core PCE to 2.8%. Preliminary University of Michigan Sentiment data is also forecasted to show a minor improvement, although it will likely remain near historically low levels.
While daily price movements suggest a potential halt to the DXY”s losses, the dollar has yet to make substantial progress in reversing the negative technical indicators. The index is now facing its second consecutive weekly decline, maintaining a focus on further downside potential. Seasonal trends typically exert downward pressure on the dollar during December.
For those monitoring the foreign exchange landscape, it is crucial to stay informed as these developments unfold, especially with the Fed”s decision on interest rates on the horizon.
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