Markets are focused on US macro data and Fed communications, with the November non-farm payrolls report expected to show weak job growth and a high unemployment rate. Weak data or dovish signals from the Fed could revive expectations of a March rate cut, while Thursday’s ECB meeting remains the main external risk to US dollar short positions, notes Chris Turner, FX analyst at ING.
Fed spokesmen could reinforce dovish bias
“In terms of the US domestic story this week, the focus will be on the big data releases and key Fed speeches. The highlight is the release of November Non-Farm Payrolls (NFP) data tomorrow. The number is expected to reach +50K, as well as the unemployment rate rising to 4.5%. Any lower than expected data here could price the next Fed rate cut. We think the Fed could cut again in March, which is only priced at 33%. Currently a possibility.”
“We are also interested in key Fed speeches and especially whether key figures see room for further cuts. We will hear from New York Fed President John Williams at 4:30pm CET today. He was influential in cautiously shifting market expectations ahead of last week’s Fed rate cut. On Wednesday, we will hear a speech on the economic outlook from Chris Waller – he has been a very influential voice at the Fed over recent years.”
“The biggest threat to dollar short positions from abroad may come from the ECB interest rate meeting on Thursday, if Eurozone growth expectations are not revised sufficiently or President Christine Lagarde opposes the ECB rate hike ideas in 2026. Today, the dollar index is likely to consolidate in the 98.00-98.50 range.”
