Halfway through the December round of central bank policy announcements the US dollar remains on the front foot, with the DXY index again close to its post-2022 high. Arguably, the dollar’s strength this week mainly reflects continued disappointing news from other major economies. While this week’s US CPI and PPI inflation data for November came in on the hot side, the details of the reports suggest that the PCE measure that the Fed targets will be considerably weaker. We still think the FOMC will deliver another 25bp cut on Wednesday. Given that money markets have already come a long way in pricing out FOMC cuts over the past couple of months, and positioning remains skewed towards dollar longs, our base case remains continued consolidation for the dollar into year-end, before another leg higher next year.
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