US greenback may pull again amid central financial institution ‘bonanza’

Investing.com — The US greenback might expertise a short lived pullback in December as a wave of central financial institution conferences unfolds, in response to Citi analysts.

9 of ten G10 central banks are set to fulfill over the subsequent three weeks, with 5—together with the Federal Reserve, European Central Financial institution (ECB), Financial institution of Japan (BoJ), Financial institution of Canada (BoC), and Swiss Nationwide Financial institution (SNB)—anticipated to announce fee changes, defined Citi.

They spotlight that market expectations at the moment align with a extra hawkish Fed and extra dovish stances from the ECB, BoJ, and SNB. Nonetheless, Citi’s FX Technique workforce anticipates a unique end result.

“Ought to markets reprice—and central banks ship—according to our expectations, we might anticipate that might result in a barely decrease USD,” the analysts acknowledged.

Knowledge from the US and Canada will play a vital function in shaping market sentiment, significantly labor market knowledge due on Friday, December 6, says Citi.

For the ECB, BoJ, and SNB, Citi sees much less instant danger for vital market surprises, however expects rising convergence in market expectations as their conferences strategy.

Within the close to time period, the greenback’s efficiency might shift towards relative fee dynamics somewhat than being closely influenced by US coverage developments.

Citi notes the potential for a “EURUSD squeeze” if central financial institution actions align with their forecasts, which they state “solely seems to be extra possible as we have a look at the broader central financial institution panorama within the coming weeks.”

Regardless of the anticipated short-term USD dip, Citi stays strategically bullish on the greenback for the primary half of 2025.

“We want to use any USD dips in December to construct longs for H1 2025,” the analysts concluded, underscoring their confidence within the greenback’s broader power heading into the brand new yr.