The US Dollar remains supported by a hawkish Fed bias as markets price in an 80% probability of a 25bps rate hike at the December 9 meeting, with key inflation data due this week.
BBH argues that robust US activity, a firm labor market and sticky inflation sustain the Fed's hawkish bias, keeping rate differentials supportive of USD. The dollar pared part of Friday's post-NFP gains, and rate expectations hinge on October CPI (Tuesday) and PPI (Friday), with futures implying 80% odds of a 25bps hike on December 9. Softer inflation prints could quickly reverse the support.
The US Dollar maintains support from a robust labor market and sticky inflation, despite paring some gains following Friday's non-farm payrolls report. Investors are now focused on upcoming October CPI and PPI data to gauge the Federal Reserve's path ahead of the December 9 policy decision.
Robust US economic activity, favorable labor market conditions and sticky underlying inflation keep the Federal Reserve's hawkish bias, which supports the dollar through favorable rate differentials.
The October CPI release on Tuesday and the PPI release on Friday are the main drivers of Fed funds rate expectations, ahead of the December 9 policy decision where futures imply 80% odds of a 25bps hike.