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The US dollar extended its dramatic recovery against the major currencies for the fourth consecutive week. The dollar's rally seems to stand on two-legs. The first shift in the expected trajectory of Fed policy, which has been partly encouraged by relatively firm economic data, both surveys and real sector reports. The derivatives market has from discounting 75 bp of cuts before the end of the year to not be quite sure that 50 bp will be delivered. This leg may be questioned if as we expect that jobs growth slowed considerably this month. However, given the storms and strikes, it will not be a clean report. The second leg the dollar is standing is the conclusion reached by some large pools of capital that despite Trump/Vance preference for a weaker dollar that their victory will likely lead to a stronger dollar through the interest rate channel and the headwinds on the US trading partners from a generalized tariff increase.
Marc Chandler is a financial journalist and analyst who writes for various publications including Snbchf, TalkMarkets, and Seeking Alpha. His work has also been featured in Barron's, MarketWatch, FXStreet, and RealClearMarkets. Chandler focuses on providing insights and analysis on topics such as inflation, currency markets, and global economic trends.
