The US dollar is extending its consolidation and correction. The team at Barclays discusses what’s next:
Here is their view, courtesy of eFXnews:
Last week’s NFP report clears the bar for a December Fed hike as the labor market remains strong and the economy is making progress towards the dual mandate, in our view.
Markets have completely priced in a hike in December, and remarks about the path and pace of tightening in 2017 by Fed speakers Dudley, Evans and Bullard this week will probably be more informative than their comments about December. The relentless rise in US yields appears to have stalled, and we see limited scope for further uptrend in UST yields without more policy clarity by the President-elect.
The post-election USD rally appears to be extended, and we would expect the dollar’s pace to moderate and USD to trade range bound.
The main data release is the ISM non-manufacturing index on Monday. We expect the index to move up to 55.4 in November, following its dip in October, and consistent with our expectation of a rebound in services employment in November. On Tuesday, we expect the trade deficit for October to widen to 42.3bn from 36.4bn in September, reversing the narrowing in the trade deficit that has taken place since mid-year. We expect factory orders to rise 3.0% in October and a revision higher to Q3 productivity and lower to Q3 ULC. Finally, on Friday we look for the preliminary December estimate of the University of Michigan sentiment index to rise further to 94.5, up from 93.8 in November.
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