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Fed’s toughest decision

Fed’s toughest decision

GBP
Sterling peaked at a six-day high against the Dollar yesterday morning but the excitement soon petered out and the Euro traded sideways. The market is ignoring Brexit chaos, for now, preferring to wait for today’s UK inflation data and tomorrow’s Bank of England Interest Decision.

This morning, headline inflation is forecasted to drop to 2.3% for November year-on-year, down from 2.4% in October. Core inflation is also forecasted to drop 0.1% to 1.8% year-on-year but the Pound is unlikely to show much reaction unless the data is weaker than expected. The market appears to be positioning for another “buy the rumour and sell the fact” scenario on the EU rejecting improvements to the Withdrawal deal and a second Brexit referendum. With that in mind, the Bank of England is expected to hold rates until the future is more certain.

USD

The Greenback traded with a negative bias yesterday as the US Federal Reserve (Fed) kick-started its two-day meeting. Investors are expecting a dovish hike of 25 basis points from the FOMC members and will be eagerly awaiting the Fed’s Economic Projections report.

WTI Crude oil slid lower for the third consecutive session over concerns of increasing supplies, doubts over the effectiveness of recent output cut by OPEC, and a looming global economic slowdown.  

The Greenback has appreciated nearly 5% against the G-10 currencies this year and the Dollar index is at an 18-month high.

The economic calendar is relatively thin today and trading is expected to err on the side of caution.

EUR

The Italian government released its revised version of its budget, with a deficit of just over 2% which is much more in line with the requirements of the European Commission (EC). It is still unknown if the EC will accept the changes, but if it is not we can expect to see much more volatility.

Versus the Dollar, the Euro is trading around the 1.1400 mark, and versus the Pound, around the 1.1115 mark. Tuesday saw the German IFO business climate fall fairly significantly, confirming fears that Germany’s economic issues were not just for Q3.

Brexit continues to dominate the news and geopolitical landscape, with very little Eurozone news due out today. We see CPI data from the UK, but otherwise focus will be on the Fed’s interest rate decision across the pond.

 

Data to watch:
09:30 GBP Retail Price Index (MoM) (Nov)
09:30 GBP Retail Price Index (YoY) (Nov)
09:30 GBP Consumer Price Index (YoY) (Nov)
09:30 GBP Core Consumer Price Index (YoY) (Nov)
09:30 GBP Consumer Price Index (MoM) (Nov)
13:30 CAD Consumer Price Index (MoM) (Nov)
13:30 CAD Bank of Canada Consumer Price Index Core (MoM) (Nov)
13:30 CAD Bank of Canada Consumer Price Index Core (YoY) (Nov)
13:30 CAD Consumer Price Index (YoY) (Nov)
13:30 CAD Consumer Price Index – Core (MoM) (Nov)
14:00 CHF SNB Quarterly Bulletin
15:00 USD Existing Home Sales (MoM) (Nov)
19:00 USD FOMC Economic Projections
19:00 USD Fed’s Monetary Policy Statement
19:00 USD Fed Interest Rate Decision
19:30 USD FOMC Press conference
22:45 NZD Trade Balance (YoY) (Nov)
22:45 NZD Exports (Nov)
22:45 NZD Imports (Nov)
22:45 NZD Trade Balance (MoM) (Nov)
22:45 NZD Gross Domestic Product (YoY) (Q3)
22:45 NZD Gross Domestic Product (QoQ) (Q3)
23:50 JPY Foreign investment in Japan stocks (Dec 14)
23:50 JPY Foreign bond investment (Dec 14)

 

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