The USD’s consolidation is extending a little further after its early week decline, leaving it mixed versus the majors. The mild “risk off” vibe is driving high beta FX is underperformance while dollar/Europe is little changed.

There is a busy session ahead for the USD. Import Prices, the Philly Fed survey and weekly claims data get the US data round going. Industrial Production, the NAHB Housing Market Index and the KC Fed manufacturing Index follow over the course of the morning.

Key data reports may be soft—weekly claims have been nudging higher and may be affected by seasonal factors while industrial production could be weighed down by the auto strikes.

The USD may come under light pressure at least as a result of weak data. There are many Fed speakers today, including Mester (non-voter, three times), Williams, Waller, Barr and Cook (all voters).

Key policymakers may continue to warn against declaring premature victory over inflation but the data trends are telling markets that the risk of tighter rates has diminished significantly and, outside of the intraday performance, risk assets are responding.

The S&P is up more than 10% from the late October low and seasonal trends suggest that jingling you can hear might be the “Santa Claus rally” that typically gains traction about now after a mid-year stutter in risk appetite steadies. Stronger stocks mean stronger headwinds for the USD.

EUR/USD is just about trading in the green on the day. Trading feels rangey and consolidative, absent any fresh news to drive markets. There are no major data reports from the Eurozone until next week’s PMIs, in effect. In broad terms, data surprise trends are improving for the EUR and weakening somewhat for the USD—a trend that may continue in the near term, with the US economy showing clear signs of slowing and anticipated headwinds for Europe.

GBP/USD is slightly softer on the session overall. There have been no data reports from the UK but yesterday’s softer than expected CPI data is hanging over the GBP’s performance even as BoE policymakers continue to suggest rates will have to remain elevated. EURGBP remains better supported (but off its intraday high) above the 0.87 area.

USD/CAD is drifting a bit lower on the day, in line with its commodity peers, after holding up relatively well yesterday and maintaining a small gain on the USD when most other G7 currencies tailed off. CAD shorts are getting nervous but can likely hold on while the USD clambers back to near 1.37 or above. Soft stocks and crude are minor constraints on the CAD in the short run but some improvement in short-term yield differentials in the CAD’s favor this week rather suggest scope for a little more strength in my opinion. Fair value has edged a little lower to 1.3698.

AUD/USD Australia’s October employment data showed that net employment increased last month by 55,000, well above the modest 7,800 increase in September. Most of the gain was due to a 37,900 gain in part-time jobs while full-time employment rose 17,000. Meanwhile, the official unemployment rate edged higher to 3.7% last month as expected, up from 3.6%. Overall, the data was not enough to force the rates market to increase the chance of a December RBA hike, however our economists continue to call for a 25bps increase. Despite the firm data, AUDUSD came off its recent highs.