The U.S. Dollar is starting what is likely to be the last busy week of the year in positive ranges following a few developments.
Overview
After a major boost to expectations of tightening from the Bank of Japan in some commentary, officials questioned about monetary policy changes were quick to dismiss them. Per their assessment, there is no need to quickly jump on a rate-hiker path especially citing the lack of wage growth. Equities and FX markets seem to be bothered by the moderate approach being taken, hungry for change, and an opening for parking funds in Japan down the line.
The following days will clarify what the Fed will do going into 2024 as they announce their decision in a meeting on Wednesday. Before that, we will get a glance at inflation in the form of the Consumer Price Index tomorrow. After data in the U.S. showed there was not a lot of economic weakening going on, the Fed’s odds of lowering rates faded to just 17.0% by May.
Naturally, this improvement to the Dollar may last and has merit as other central banks around scramble to choose the best approach while facing mostly contractions across growth indicators. Dovishness from Powell may be the only potential for a Dollar downer.
What to Watch Today…
- U.S. CPI Tuesday 8:30 AM
- U.K. Unemployment Tomorrow
- FOMC Meeting & Presser Wednesday 2 PM
- Monex USA Online is always open.
GBP ⇓
Much like Euro, Sterling has seen its fortunes dwindle ahead of the Bank of England meeting on Thursday. Ahead of the decision, we will get a chance to look at the Unemployment Rate tomorrow, and data-wise we will close with Manufacturing Purchasing Managers Index figures on Friday. The narrative in the U.K. is similar to Europe: fiscal spending must start helping the economy after inflation is controlled and subdued. It is in the budgeting and economic modeling that things are looking difficult. Central bankers are likely going to explain there are limits to what else they can do.
EUR ⇓
The Euro has lost ground rapidly recently, down by 1.2% already in the month of December. The economic situation in Europe has not been filled with much in terms of positivity lately and the chances for needing to pivot monetary policy strategy before the Fed have taken away November momentum. Recall that the Buck suffered losses of over 2.5% last month but is quickly on the recovery after December has been characterized by doubts over global well-being. Outside of the U.S., the negative effects of energy resources and stubborn inflation have deteriorated the situation on the other side of the Atlantic. We will look at Industrial Production on Wednesday and hear from the European Central Bank on Thursday.
