A speech from the Fed’s Christopher Waller will be key today. Economists at ING analyze the dollar’s outlook ahead of the event.
Waller’s speech from the Fed will be important for the dollar
Economic data is light, but we are hearing from some central bank spokespeople, most importantly the Federal Reserve spokesperson. Recall that he gave a critical and poignant market speech “Something Looks Like It’s Coming” in late November. At the time, the report concluded that the conflict between strong US growth and sluggish inflation appeared to be heading toward resolution in favor of combating inflation. Today we assume that he will stick to the same basic message of successful disinflation and will not want to engage in fine-tuning to discuss the 2024 monetary easing cycle, but not from March. We therefore see event risk as benign – slightly negative for the dollar and positive for the dollar.
The DXY has clear resistance at 103.10/103.20 and the case we have outlined above suggests that these levels may hold the top of the trading range today.
If we are wrong and Waller is sent to respond to strong easing expectations (market price 18bps from first 25bps cut in March and 158bps of easing this year), DXY could break resistance and head to 104.00/104.25 multi-day zone.