USD ticks up with Fed’s Musalem pushing back on rate cut bets for December

• The US Dollar gains on the back of hawkish comments from Federal Reserve Bank of St. Louis President Alberto Musalem.
• French lawmakers are casting votes in a no confidence vote against Michel Barnier’s government this Wednesday. 
• Fed Chairman Powell is set to speak during the American session, likely adding volatility to the US Dollar Dollar Index. 

The US Dollar (USD) is ticking higher after comments from Federal Reserve Bank of St. Louis President Alberto Musalem. who suggested that a rate cut in December is not a good option for the Fed, while a no-confidence vote in France is set to take place. Chances that Prime Minister Michel Barnier will survive the vote are slim to nil, with President Emmanuel Macron forced to select a new prime minister to form a new government in the coming weeks. Meanwhile, in the US, traders are starting to keep their powder dry ahead of Friday’s US Jobs Report. 

On the economic data front, the Institute for Supply Management (ISM) is up next with a data release gauging the health of the US services sector. The Services Purchasing Manager Index (PMI) for November will be the most market-moving element for this Wednesday. The ADP private payroll estimate held no surprise and was a very small miss on estimates, not moving the needle. Late in the US trading session, Federal Reserve (Fed) Chairman Jerome Powell will speak at the New York Times DealBook Summit in New York.

Daily digest market movers: Musalum pushes back on rate cut bets

• The ADP Job Change numbers for November comes in a touch softer at 146,000, below the 150,000 estimate and down from 233,000 in October. 
• At 14:45 GMT, S&P Global will release its final reading of its November numbers for the Purchasing Managers Index. The services index is expected to remain unchanged at 57 while the Composite should remain stable at 55.3.
• The Institute for Supply Management will release its November survey for the Services sector at 15:00 GMT. The headline PMI is expected to soften at touch to 55.5 from 56 previously.
• Three Federal Reserve members will speak this Wednesday:
  • at 13:45 GMT, Federal Reserve Bank of St. Louis President Alberto Musalem has delivered a keynote speech on “Monetary Policymaking: Central Banking in a Changing World” at the College of Central Bankers Symposium in New York City, United States. Fed’s Musalem commented that a rate cut in December is too big of a gamble seeing the recent geopolitical tensions and activities that could spark a fresh inflation surge, Bloomberg reported. 
  • Around 18:45 GMT, Federal Reserve Chairman Jerome Powell participates in a discussion at the New York Times DealBook Summit in New York.
  • Closing off at 23:00 GMT, Federal Reserve Bank of San Francisco President Mary Daly is interviewed at PBS New Hour.
• Equities are looking for direction with some nervousness over South Korea and France limiting gains for this Wednesday. European equity indices and US futures are up less than 0.5% on average. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 73.8%. A 26.2% chance is for rates to remain unchanged. The Fed Minutes and recent comments from several Fed officials have helped the rate cut odds for December to move higher. 
• The US 10-year benchmark rate trades at 4.27%, ticking up from the 4.21% seen on Tuesday. 

US Dollar Index Technical Analysis: US Jobs Report turns important

The US Dollar Index (DXY) is ticking up slightly ahead of the Nonfarm Payrolls print of Friday. After the turmoil at the start of the week on the back of the French political stage, it looks that traders want to keep their powder dry going into Friday’s Jobs Report. Although Fed Chairman Jerome Powell is set to speak, not manyuch market- moving comments are expected.  

On the upside, 106.52 (April 16 high) remains as the first resistance to look at after failing to close above it this week. Should the US Dollar bulls reclaim that level, 107.00 (round level) and 107.35 (October 3, 2023, high) are back on target for a retest. 

Looking down,Should the French government fall and a new, more stable, government formation is set to take place,  the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation. 

US Dollar Index: Daily Chart

(This story was corrected on December 04 at 13:58 GMT to say Closing off at 23:00 GMT, Federal Reserve Bank of San Francisco President Mary Daly is interviewed at PBS New Hour, not 13:00 GMT)