The US Dollar (USD) is adding marginally to net losses on the week into Friday trade but the broader tone of price action is perhaps tending towards consolidation in DXY losses, with the index edging back to the 99 area, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets eye Fed ahead of expected rate cut

"News and developments in overnight trade are limited, however, and overall movement in FX reflects this. Markets are perhaps starting to consolidate ahead of the Fed. Even though Fed policymakers won’t have the delayed NFP data at hand when they sit down to deliberate on rates at Wednesday’s FOMC, this week’s private sector data for Nov confirm the continued slowdown in the US labour market."

"Yesterday’s ADP reported a 32k fall in private non-farm payrolls while the Revelio PLS series came in with a 9k drop in hiring. The data may not tally closely with official NFP data on a month-by-month basis but the trend is clear and should help deliver the now widely expected 25bps cut. More uncertainty revolves around the policy outlook heading into 2026. This morning’s delayed September Personal Income/Spending and PCE data are expected to show a moderate rise in spending and income. Core PCE is expected to edge slightly lower to 2.8%."

"Preliminary U. Michigan Sentiment data is forecast to improve marginally (to 52) but remain close to record low levels. While daily price action suggests a pause in the DXY losses, the dollar has not done enough to reverse negative technical drivers and a second weekly decline in the index keeps the broader focus on the downside (we target the mid97 range still). Seasonal trends are broadly dollar negative in December."