US Dollar (USD) retraced some of yesterday’s losses and stock markets stabilized after selling off yesterday. USD will struggle to gain more upside traction as it’s trading above the level implied by US-G6 2-year bond yield spreads. The November University of Michigan sentiment index is up next (3:00pm London, 10:00am New York). Headline is expected at 53.0 vs. 53.6 in October, well below the long run average at 84.4. Watch the measures of inflation expectations to confirm that price pressures remain contained, BBH FX analysts report.

Fed officials lean against rapid rate cuts amid weak data

"An hour later, the New York Fed releases its survey of consumer expectations. Pay attention to see if there’s a further increase in the mean perceived probability of losing one’s job in the next twelve months. The latest data points to a higher unemployment rate. US liquidity conditions are back to normal after seizing up briefly late last month. The spread between the tri-party general collateral rate (TGCR) and interest rate on reserve balances (IORB) has tightened back to nearly 0bps after overshooting to +25bps on October 31. In normal conditions, TGCR should be close to or slightly below IORB on average over time."

"Upward pressure on funding rates in recent months reflects temporary factors related in part to fiscal flows and the US Treasury’s growing cash balance at the New York Fed (TGA balance) due to the government shutdown. My colleague Jorge Aseff, Portfolio Manager Inflation-Indexed Fixed Income, points out that while we can see further brief jumps in the funding market in the near term, the situation is not alarming. We agree. First, the Fed will end the reduction of its aggregate securities holdings on December 1, ensuring that reserves remain ample. Second, the Fed has established strong tools (the discount window and Standing Repo Facility) to put a ceiling on money market rates and to provide additional liquidity if needed."

"The 'growing chorus' of Fed officials supporting skipping a cut were vocal yesterday. Both St. Louis Fed President Alberto Musalem (FOMC voter) and Cleveland Fed President Beth Hammack (2026 FOMC voters) stressed the importance of leaning against above-target inflation. In parallel, Chicago Fed President Austan Goolsbee (FOMC voter) argued to 'be a little careful and slow down' easing amid the lack of inflation data during the government shutdown. Today, Fed Vice Chair Philip Jefferson speaks on AI and the economy (12:00pm London, 7:00am Nedw York) and Fed Governor Stephen Miran speaks on stablecoins and monetary policy (8:00pm London, 3:00pm New York)."