USD recovered some of yesterday’s losses and trading close to the middle of its range in place since June. The MSCI All Country World Index rallied to a record high yesterday underpinned by Fed easing and resilient global economic activity. USD has room to edge down to the lower-end of its range as it converges towards the level implied by US-G6 rate differentials, BBH FX analysts report.

Fed reappointments highlight continuity

"The Federal Reserve Board of Governors unanimously reappointed 11 of the 12 regional Fed presidents to new five-year terms which begins on March 1, 2026. Atlanta Fed President Raphael Bostic previously announced he would retire at the end of his term on February 28, 2026. The reappointments underscore institutional continuity, and ease worries about political interference at the Fed."

"Philadelphia Fed President Anna Paulson (2026 FOMC voter) speaks on the economic outlook. Paulson leans cautiously dovish. In her last November 20 speech, she noted 'On the margin, I’m still a little more worried about the labor market than I am about inflation'. Staunch hawk Cleveland Fed President Beth Hammack (2026 FOMC voter) speaks half-an-hour later, followed by Chicago Fed President Austan Goolsbee (2025 FOMC voter). Goolsbee voted to keep rates on hold at this week’s FOMC meeting."

"In our view, the Fed will deliver more than the one cut it has penciled in for next year. US labor demand is weak and upside risks to inflation are not martializing. Next week is key with November non-farm payrolls and CPI on deck. Fed funds futures fully price-in 50bps of total easing in the next twelve months."