USD: DXY to stay bid in a 106.00-106.70 range today – ING

Friday's softish US jobs report only landed a glancing blow on the dollar and the Dollar Index (DXY) did indeed find good support below 106. Geopolitics is probably helping the USD a little. Markets probably do not know immediately what to make of the regime change in Syria, but uncertainty in Korean politics and the underperformance of Korean asset markets is certainly noteworthy, ING’s FX analyst Chris Turner notes.

November's CPI dominates this weeks calendar

“Looking ahead this week, we see two themes. The first could be some large rate cuts in the rest of the G10 FX markets. Here we have rate meetings in the eurozone, Switzerland and Canada this week. 25bp or 50bp rate cuts are options in all, although more likely will it be that just Canada sees a 50bp rate cut. Here the narrative is that while most of the G10 central banks (ex Japan) are looking to cut rates back to neutral, the Federal Reserve will be slower than most trading partners and interest differentials will continue to stay wide in favour of the USD.”

“The second theme is the US calendar this week, where Wednesday's release of November's CPI dominates. Consensus expects another sticky 0.3% core month-on-month reading. While not ideal for the Fed, such a reading should not prevent the central bank from cutting 25bp a week later. But a 0.4% MoM reading on core CPI would really throw the cat amongst the pigeons and more seriously question whether the Fed is right to be cutting rates after all.”

“The Fed is also now in blackout mode ahead of its rate meeting on 18 December, and the only other thing of note in the calendar is tomorrow's release of the NFIB small business optimism index – seen as slightly dollar positive. There seems little reason to reduce long dollar positions right now and after two weeks of consolidation, we see it as more likely that the dollar will resume its bull trend. We favour DXY to stay bid in a 106.00-106.70 range today.”