The U.S. Dollar is extending its losses for a second day following the surprises at lower-than-expected Consumer Price Index figures in the U.S.
Overview
Today, the much-awaited last meeting for the Fed will end with a decision, guaranteed to be another 50-basis-points hike to the Federal Funds Rate. Anything else will be taken as guidance for what is to come in 2023: ongoing hikes until the first half of the year?
A terminal rate that will take an even longer period of rate increments? An end to the tightening mentality and hawkishness to opt for a more accommodative financial environment? The press conference will be one to watch and the reaction will certainly drive things in one of two directions, likely sharply.Once we have clarity on the Fed, data will close out the week and help further in determining if the buck has indeed room to fall. Thursday will give us Retail Sales for November and Jobless Claims for the holiday season cycle. Additionally, we will hear from plenty of commentators about the chances that we will see a resilient economy into next year or a more vulnerable one to recessionary dips. Plenty of central bank action tomorrow will follow the announcements by the Fed.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
Euro has been gaining off the negative dollar reaction, climbing to its best levels since June. The excitement of a better economy in 2023 that was sparked in the Summer has been revived as inflationary pressures seem to be decreasing while China works on opening itself up and regaining more influence in trade. It is a bit disappointing though, to see this morning that overall Euro-zone aggregate Industrial Production for October contracted more than expected and, after a month of expansion, close to 1.0%. October was expected to be a down month with (-1.55%), but it came to (-2.0%). Again, today will be key to see if Euro can reach other zeniths.
GBP ⇑
Sterling remains up against the buck, the best since June also, ahead of tomorrow’s Bank of England meeting and after the release of inflationary data earlier this morning. Retail Prices as well as CPI for November, increased by less than forecast, bringing CPI to 10.7%, staying just under 11.0% for the year. Although fears of economic pain had been hyped for the U.K., it looks as if the government and industrial leaders have improved their outlooks, although the prospect of higher taxes all around is seen by some as preventative to the growth needed. As we figure out central bank thinking going forward, we will test how strong the Pound can stay considering the challenges foreseen by the Bank of England.
