From Marc to Market, December 13 (weekly outlook daily returns in January):
Encouraged by the Federal Reserve's rate cut and its T-bill purchases, the dollar was sold. The Dollar Index fell for the fourth week in the past five. Leaving aside the Bank of England, which will most likely cut rates in the week ahead, the easing cycle of most of the other G10 central banks appears complete. The median dot in the Fed's new Summary of Economic Projections remained at one cut next year, while the market, perhaps with eye toward the personnel changes, anticipates at least two cuts next year. We have anticipated this divergence in the trajectory of monetary policy, which has driven our dollar bearish outlook. However, as we discuss below, the market has absorbed the news, and the momentum indicators warn that the dollar's decline is over-extended in the near-term. A period of consolidation seems likely.
The week ahead features six G10 central bank meetings (ECB, BOE, Norway's Norges Bank, Sweden's Riksbank, the RBNZ and the BOJ). Most will not change rates. The exception is the Bank of England, which will cut, and the Bank of Japan, which will hike. Two Latam central banks meet (Chile and Mexico), and both will likely cut and signal at least a pause. The Czech central bank meets, but its easing cycle ended in May and looks to on hold for the next couple of quarters at least. The US economic calendar plays a bit of catch-up with the November jobs and CPI, and October retail sales. The preliminary December PMI will also be released for many of the economies we track.
US
Drivers: The Federal Reserve's rate cut coupled with new effort to provide ample reserves via T-bill purchases sent the greenback lower....
....MUCH MORE