Fundamental Forecast for the US Dollar: Neutral
- While there are only three ‘high’ rated events in the days ahead, a slew of ‘medium’ ranked US data releases will keep event risk on the radar Tuesday through Friday.
- Ahead of the December Fed meeting, rates markets are effectively pricing in a 91% chance of five 25-bps rate hikes over the next two years – not significantly changed from prior to Thanksgiving, when Fed Chair Powell’s more hawkish commentary emerged.
- According to the IG Client Sentiment Index[1], the US Dollar[2] has a mixed bias heading into mid-December.
US Dollar Week in Review
Consistent with its mediocre December seasonal tendency, the US Dollar (via the DXY Index) edged lower during the second week of the month. The DXY Index shed -0.11% over the week, and is now up by +0.18% in December. The largest component of the DXY Index, EUR/USD[3], added +0.09%. GBP/USD[4] rates gained +0.27% while USD/JPY[5] rates appreciated +0.50%. The commodity currency trio were the most significant movers on the week. USD/CAD[6] rates dropped by -0.87%, while two non-DXY components, AUD/USD[7] and NZD/USD[8] rates, added +2.49% and +0.71%, respectively.
US Economic Calendar in Focus
The middle of December brings about another saturated economic calendar for the US economy. While there are only three ‘high’ rated events in the days ahead, a slew of ‘medium’ ranked releases will keep event risk on the radar Tuesday through Friday. Federal Reserve policymakers’ speeches resume at the end of the week after the communications blackout period ends.
- On Tuesday, December 14, the November US producer price index (PPI) will be released, bringing forth another set of inflation data.
- On Wednesday,
