The U.S. dollar has weakened 1.94% since its most recent intraday high set on November 22nd. The dollar index has found support in the 105.50/106.00 range, key levels from April and July of this year.
The dollar’s recent weakness traces back to November’s PCE inflation data (for October) of 2.3% annualized. Although this was higher than the previous 2.1%, it matched market expectations and showed inflation remains tame at the personal consumption level. The persistence of low inflation frees the Fed to cut its policy rate at the December 18th FOMC meeting. Odds of a 25 basis-point cut have increased from 52.3% on Nov 20th to 89.3% today.
U.S. Treasury yields have traded lower since late November in tandem with the dollar, driving the benchmark 10-year yield from its November 13th high of 4.452% to 4.183% today.
The dollar is lower today vs. most major currencies, the biggest declines vs. ZAR (-1.39%), AUD (-1.14%), NZD (-0.89%), and NOK (-0.61%). More moderate declines are seen vs. GBP (-0.37%), MXN (-0.31%), CAD (-0.27%), and EUR (-0.18%).
The dollar does have a few gains today which are concentrated vs. APAC: JPY (+0.68%), KRW (+0.49%) and TWD (+0.26%).
The highlights of this week’s economic calendar include November CPI on Wednesday and PPI on Thursday.
