US Dollar Index Recovers

CURRENCIES

The U.S. dollar index is higher, recouping some losses from last week in light of continued resilience of the U.S. economy and a deteriorating economic outlook in other parts of the world.

The greenback also received a boost after U.S. President-elect Donald Trump threatened BRICS member countries with 100% tariffs if they create or support a new currency that could replace the U.S. dollar.

In addition, the U.S. dollar benefitted from a pullback in the euro currency, which was adversely affected by political uncertainty in France.

The fundamentals and technicals remain supportive to the U.S. dollar.

Euro zone manufacturing activity weakened sharply last month. HCOB’s final euro zone manufacturing PMI, compiled by S&P Global, sank to 45.2 in November, matching a preliminary estimate and is further below the 50 mark that separates growth from contraction. In October the index was 46.0, and the headline reading has been below 50 since the middle of 2022.

There are expectations that the European Central Bank will lower its key interest rates more aggressively than the Federal Reserve, which is likely to put additional pressure on the euro.

The fundamentals and technicals remain bearish for the euro currency, and lower prices are likely.

A gauge of U.K. manufacturing activity pointed to the sharpest contraction in nine months.

The S&P Global manufacturing PMI fell to 48.0 in November from 49.9 in October, which is below an earlier estimate of 48.6 and the 50 level.

The Canadian dollar weakened as investors digested last week’s gross domestic product data that reinforced expectations of a 25 basis point interest rate cut by the Bank of Canada at its December 11 policy meeting.

INTEREST RATES

Futures are lower across the board.

Federal Reserve speakers today are Christopher Waller at 2:15 and John Williams at 3:30 PM.

There is a 62% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 38% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.

It is likely that the FOMC will be slower to add accommodation in 2025 than the consensus view.

STOCK INDEX FUTURES

Stock index futures are mixed to higher.

The 8:45 central time November PMI manufacturing final is expected to be 48.8.

The 9:00 November Institute for Supply Management manufacturing index is anticipated to be 47.6, and the 9:00 October construction spending report is estimated to show a 0.2% increase.

The long term fundamentals and technicals remain supportive to stock index futures.

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