Yesterday’s Fed speakers suggested an openness to another pause at the next FOMC rate decision on December 13th, dropping the USD against its G10 counterparts for the fifth straight day and its lowest level in nearly 4 months. Governor Christopher Waller – one of the most hawkish Fed members - said policy is well positioned to return inflation to the Fed’s 2% goal. Governor Michelle Bowman stated she remains willing to support rate hikes should inflation progress stall, though stopped short of advocating a rate increase at the next decision. Attention will now shift to Fed Chair Powell’s speech on Friday for cues that may point to an easing bias as investors continue to price higher odds of a first rate cut into the May 2024 decision date.

The USD would enter today’s North American having reversed some of yesterday’s losses ahead of the second estimate of Q3 US GDP. The GDP estimate beat expectations of 5.0% quarter-over-quarter growth, coming in at 5.2%.

New Zealand’s central bank (RBNZ) held their policy rate overnight, surprising markets with forecasts that showed policy rates may not be cut until mid-2025. The RBNZ statement showed concerns about persistent inflationary risks, and the NZD would rally towards 4-month highs.

Spanish and German CPI releases overnight both came in softer than expectations, though EUR/USD price action was muted as investors await tomorrow’s broader Eurozone aggregate CPI data as the next large key input to the ECB decision-making process.

GBP/USD enters today’s North American session largely unchanged. BOE Governor Andrew Bailey echoed his recent comments overnight that the central bank is not in a place to discuss interest-rate cuts. The next BOE decision is on December 14.

The USD/CAD would trade marginally lower overnight, in-line with other G10 counterparts. The Canadian data slate for the remainder of the week brings key economic inputs in Q3 GDP (tomorrow) and employment data (Friday).

USD/MXN declines overnight but trades in recent ranges, similar its to other EM counterparts. Peso traders will be on the watch for any dovish language that could signal rate cuts ahead in today’s inflation report release. Mexican unemployment rate data comes tomorrow.