US dollar index strengthens above 111 ahead of FOMC week Fed focuses on December guidance. Economists at Société Générale report that a signal of slow tightening next month could prevent a push above the 11 level. DXY LOSSES SHOULD BE LIMITED „While expectations of a final exchange rate next spring rose last month to 5%, this did not lead to new highs for the dollar. The question may then come down to whether the US labor market, unlike the housing economy, can still withstand the double pressure caused by inflation (profit margins) and rising borrowing costs. US employment, ISM and payrolls are also down this week, which could likely have a bigger impact on where the dollar, as well as bond yields, go in early November. „Yields above 11 seem to be a big question whether Fed signal tightening could slow in December.” „External gains in USD/G10 since October 21st were mainly driven by a rise in the pound (2.6%), but gains were small compared to other currencies that make up the bulk of the DXY, such as the euro (0.6). In other words, DXY’s losses should be limited if there is a large advance in the common currency, the yen or the pound, which seems unlikely.