The USD remains resilient, defying the typical seasonal trend despite weaker signals from manufacturing in key global economies. Monday’s composite PMIs were better than expected in developed markets, but manufacturing continued to show signs of softening. Market pricing remains firm for a 25-basis point cut at the upcoming Federal Reserve meeting, and dollar crosses are consolidating within their ranges. Even with stronger-than-expected retail sales data today, any substantial impact on the Fed’s decision tomorrow is anticipated to be minimal due to ongoing weather-related data distortions.
According to ING’s FX analyst Francesco Pesole, expectations for a 25-basis point rate cut remain in line with the consensus, and retail sales will have little bearing on the Federal Reserve’s stance. The focus is now on whether the Fed signals a more dovish path than anticipated, though this remains unlikely. With the 2-year USD OIS rate around 4%, this counter-seasonal factor is likely the key to preventing any major correction in the dollar, despite typically softer conditions in December.
