The United States Dollar is trading in mixed territory this morning ahead of a jam-packed week of central bank meetings and economic data releases from around the world
Overview
Decisions from the Federal Reserve, Bank of Japan, and Bank of England all hit the wire this week after key decisions last week from the Swiss National Bank and European Central Bank. Wednesday and Thursday are likely to be the busiest days, with UK and EU CPI both due out Wednesday in addition to the US’ final GDP reading for Q3 out Thursday morning during the last full trading week of 2024.
Though most central bank movements this week are largely priced in by traders, there is still substantial room for volatility should any of the three major banks releasing decisions this week provide tangible forward guidance for the year of 2025, just around the corner. The Federal Reserve is more than likely to cut interest rates by 25 basis points Wednesday afternoon, but markets are anticipating that Chair Jerome Powell may signal a pause in this easing cycle come January and will be watching closely for any changes in tone from the Fed’s prepared statement and Powell’s press conference following the decision. The Bank of England, by contrast, is likely to hold interest rates steady this month and set the stage for a cut next month after recent inflationary readings showed stalling progress back toward the BoE’s 2% target. The Bank of Japan is the only true wild card this week, as recent chatter from the central bank has pushed back expectations of a hike this week to January of 2025.
Historically December has been a less-than-stellar month for the Dollar, but such weakness particularly against EUR usually comes in the final two weeks of the calendar year. Month-, quarter-, and year-end flows may all combine to see a decline in USD strength, but such an outcome is quite up in the air ahead of many key data points and decisions across the world. With global trading holidays both next Wednesday and the following Wednesday January 1st, it promises to be a busy week ahead for markets across the spectrum.
What to Watch This Week…
- US Preliminary December PMI, Monday 9:45AM
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- FOMC Interest Rate Decision, Wednesday 2PM
- Bank of England Rate Decision, Thursday
- Bank of Japan Rate Decision, Thursday
- US GDP Q3 Final, Thursday 8:30AM
- US PCE Price Index, Friday 8:30AM
- Monex USA Online is always open
EUR ⇓
The single currency, though trading stronger than at last week’s lows, is still unable to find a substantial foothold against USD this morning. EUR traded at one point 0.2% higher against the Buck after preliminary PMI readings for December came in stronger than expected, but has since given up such gains to slip slightly. The Eurozone geopolitical picture continues to be a thorn in the side of the currency. Last Friday, Moody’s downgraded France’s credit rating, citing continued political turmoil and budgetary gridlock. European Central Bank President Christine Lagarde also spoke following the bank’s decision to cut interest rates by 25 basis points last week and noted that while domestic inflation remains too high, price momentum in the service sector in particular has “dropped steeply recently.”
GBP ⇑
Pound Sterling is one of the larger winners against USD this morning across the G10, gaining ground against EUR and CHF as well. After last week’s GDP release for Q3 surprised to the downside, UK markets got better news this morning as December’s preliminary PMI readings came in better than expected. All eyes, though, are focused on the Bank of England later this week, largely expected to hold interest rates steady. BoE Governor Andrew Bailey has leaned dovish in tone through the back half of this year, however, and continuing growth concerns could set the stage for further dovish forward guidance from the central bank Thursday morning.
