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The US dollar is mildly in green territory, with traders focusing on Tuesday and Wednesday as pivotal points this week. The Dollar Index is expected to make no significant moves with a light Monday calendar.
The AUD/USD and the USD/SEK pairs are outliers gaining against the US dollar. Markets experience a calm start to the week, with traders assessing and prepositioning towards Tuesday and Wednesday’s data releases.
On the economic front, traders will assess the uptick in Friday’s University of Michigan expectations regarding the inflation outlook and assess if the US Consumer Price Index and Producer Price Index will already reflect that assumption.
As a result, traders are best to brace for a very nervous and volatile week in the Dollar and the US Dollar Index.
On the geopolitical front, all eyes are on the meeting between Chinese President Xi Jinping and US President Joe Biden on Wednesday in San Francisco. US Government shutdown headlines are picking up again, triggering some safe haven inflow into the dollar. The Pentagon has confirmed that it has hit Iran-linked targets in Syria.
China is weighing unfreezing Boeing 737 orders, and European Central Bank Vice-President Luis de Guindos issues says he expects a temporary inflation rebound in the coming months.
This Monday, the Japanese market is still dormant, with stocks closing flat. While European equities are marginally up, the Hang Seng in China is surging by over 1%. This Monday, US equities are down less than 1% and are rapidly declining.
The CME Group’s FedWatch Tool shows that markets are pricing in a 91.2% chance that the Federal Reserve will keep interest rates unchanged at its meeting in December. The benchmark 10-year US Treasury yield trades at 4.68% and is slowly making its way up again.
