USD: Inflation still a headache – ING
17.01.2025, 09:59

USD: Inflation still a headache – ING

FX markets may enter holding mode today as the US data flow slows and some wait-and-see approach prevails ahead of Monday’s presidential inauguration, OCBC's FX analyst Francesco Pesole notes.

Fed enters the communication blackout period tomorrow

"The perception at the end of a busy week in macro news is that the optimism around a month-on-month slowdown in core inflation is cautious at best. The inherently forward-looking markets are factoring in Trump’s inflationary policies from a starting point that is already significantly above the target. So, despite stretched positioning and short-term overvaluation, the dollar continues to dodge true catalysts for a correction."

"Yesterday’s Senate hearing of Treasury Secretary nominee Scott Bessent was not particularly eventful for markets. He predictably stressed the need to cut discretionary government spending – a flagship Trump policy – but did not sound as hawkish as Trump on delivering new tax cuts. In the first Trump administration, cabinet members often had to temper the President’s strong statements, and we can probably expect Bessent to deliver more balanced remarks on fiscal policy, considering the impeding debt constraints."

"Today’s calendar includes housing starts and industrial production in the US, which are both expected on the strong side. The Federal Reserve enters the communication blackout period tomorrow ahead of the 29 January meeting. We expect some stabilisation in most dollar crosses today."

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