TD Securities expects the U.S. dollar to remain supported as investors price in further Federal Reserve tightening, a view that keeps U.S. yields and major currency pairs in focus, FXStreet reported.
FXStreet attributed the outlook to TD Securities’ foreign-exchange team, led by Head of FX Strategy Jayati Bharadwaj and FX Strategist Howard Du. It said the team sees USD/CAD retesting 1.43 and EUR/USD moving below $1.10. FXStreet also said the team saw falling stock prices as a weaker source of demand for the dollar, while higher U.S. yields continued to support its case.
MUFG Research said markets had fully priced a 25-basis-point rate increase for December, with about 28 basis points of increases priced by that meeting and 43 basis points by the following January meeting. Those figures reflect market pricing, not a Fed commitment. MUFG also reported that the dollar index reached a year-to-date high of 103.08 on Nov. 12. The 10-year Treasury yield was 5.15% on Nov. 13, up from 5.10% a day earlier, Treasury data showed.
The Fed held its benchmark rate at 3.75% to 4.00% in October in a 10-2 vote. Before the October consumer price report, Fed Gov. Christopher Waller said he leaned toward a 25-basis-point increase in December and that officials should consider a 50-basis-point move if core inflation was around 0.3% or higher. Waller said his views were his own and did not necessarily represent the Federal Open Market Committee. The U.S. Bureau of Labor Statistics (BLS) later reported that October consumer prices rose 0.4% from September and core prices rose 0.3%.
The BLS reported that producer prices rose 0.3% in October from the prior month and 6.5% over the 12 months ended in October. The release came after FXStreet published its report on Nov. 13, so it was not part of the information available for that report.
The dollar outlook differs from TD Securities’ September view, which was negative on the currency through year-end and linked sustained weakness to investor risk appetite and overseas stock performance, as described in EconoTimes’ coverage of the September outlook. The Fed’s next scheduled meeting is Dec. 8-9.
