USD remains firm as GBP underperforms – Scotiabank

The US Dollar (USD) is firm but off its early session highs, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD firm but off highs, may consolidate ahead of NFP

“With no major data reports due today and US payrolls out tomorrow, it may be a day of consolidation for a still stretched—in my view—looking USD. Positioning and valuation remain extended and while US yields are firmer, spreads have generally steadied or narrowed marginally against the USD. Technicals are leaning marginally bearish for the DXY intraday; a bit more softness might creep in below 108.95 support.”

“Yesterday’s FOMC minutes for the December policy decision reflected the expected degree of caution on the outlook for rates following Trump’s election win. A ‘substantial majority’ of policymakers thought the Fed was well-positioned to ‘take its time’ with rate policy moving forward.

“Markets have effectively priced out any chance of another rate cut before mid-year and remain reticent on pricing in much more than one 25bps cut over the balance of 2025, with a bit less than 40bps of hikes priced in to the swaps curve for the year overall. There are a number of Fed speakers on tap today; among them, Collins, Schmid and Bowman are voters this year. Comments from Collins overnight echo the Fed’s more cautious stance.”