The dollar index (DXY00) on Monday rose by +0.08% but remained below last Friday’s 3-week high. Higher T-note yields on Monday supported the dollar. Also, weakness in the yen on Monday was positive for the dollar on a report that the BOJ is in no hurry to end negative interest rates. The dollar also had carryover support from last Friday’s stronger-than-expected U.S. Nov payroll report. Strength in stocks on Monday limited the dollar’s upside.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 43% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (107%) that -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
