US Dollar retains Fed support as markets monitor data – BBH

The forthcoming US October CPI and PPI releases will be key drivers of Fed funds rate expectations ahead of the December policy meeting, according to Brown Brothers Harriman’s (BBH) Elias Haddad. Although the US Dollar (USD) has surrendered some of its post-NFP gains, Haddad notes that resilient US economic activity, a strong labour market and persistent inflation continue to support the Federal Reserve’s (Fed) hawkish bias and, in turn, the currency.

Dollar Draws Support as Fed Outlook Hinges on Data

"USD pared back some of Friday’s strong October non-farm payrolls gains. Going forward, robust US economic activity, favorable labor market conditions and sticky underlying inflation back the Fed’s hawkish bias, keeping rate differentials supportive of USD"

"The October New York Fed consumer survey is today’s data highlight (4:00pm London, 11:00am New York). But this week’s US October CPI (Tuesday) and PPI (Friday) prints will be the main drivers of Fed funds rate expectations. Fed funds futures imply 80% odds of a 25bps hike at the next December 9 policy decision."

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