The US Dollar (USD) squeezed out a sixth, if marginal, consecutive gain overall on Friday and the Dollar Index (DXY) is tracking marginally higher for a potential seventh to start the week off, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

USD mixed into Fed meeting

“The Pound Sterling (GBP) and Swiss Franc (CHF) are moderate outperformers on the session, however, while the USD has firmed a little against the Euro (EUR), Japanese Yen (JPY) and the commodity currencies. Despite typically negative seasonal trends for the USD through December, the USD looks unlikely to concede much, if any, ground in the short run.”

“The holidays are looming but there is still a fair bit of event risk to negotiate this week, namely the FOMC decision Wednesday. Market expectations are veering towards a hawkish cut—that is a 1/4-point ease to match market expectations accompanied by a guidance that suggests a more cautious policy path in 2025. Forecast updates may reflect an improved growth outlook, lower unemployment but higher inflation.”

“Markets will be particularly sensitive to any changes in the dot plot. A more cautious-sounding Fed will underpin the recent rebound in yields and repricing in Fed expectations and provide further support for the USD. Central bank policy decisions in the UK, Japan, Sweden, Norway and Mexico are also due later this week. US data reports today are confined to the December Empire survey and S&P Global PMIs.”