After gaining much of last week, the U.S. dollar was able to hold on to most of its gains.
This will be a busy week for central banks as monetary policy makers in the U.S., the EU, Britain and Switzerland will all make policy announcements. Traders will be looking for forward guidance on interest rate policy from each central bank. Wall Street, for the most part, is bullish on the world economy for 2018. As such, JPMorgan Chase & Co. predict average interest rates accord advanced economics will climb to at least 1% next year, the largest increase since 2006.
The U.S. Federal Reserve will conclude their two day meeting on Wednesday afternoon. Fed Futures show a 98.3% chance the central bank will boost rates by a quarter point. While the hike is already priced-in to current price levels, market participants will pay particular attention to outgoing Fed President Janet Yellen’s press conference. The Fed will also release its growth and inflation outlooks of 2018 which may help dictate future interest rate speculation.
Retails Sales will be released on Thursday morning followed by Industrial production and Empire state manufacturing on Friday.
The New Zealand dollar jumped a percent against the majority of its counterparts on hopes that the newly appointed head of the central bank will be less dovish than his predecessors. Adrian Orr, the chief executive of the New Zealand sovereign wealth fund as its new central bank governor. The current leadership of the Reserve Bank of New Zealand has set a bearish tone and has said that they are not willing to consider a rate hike until the second half of 2019. Orr is seen as less dovish and may be open to interest rate hikes sooner than the end of 2019, boosting the “kiwi.”
The British pound continues to trade on its back foot as knee-jerk euphoria over apparent progress in negotiations quickly dwindled. Brexit will continue to dominate headlines and dictate sterling movements, but there is also fundamental data set to be released that could stoke more volatility. Inflation will cross the wires on Tuesday, followed by jobs data on Wednesday. The Bank of England will make their policy announcement on Thursday. The central bank is expected to hold its current policy after its “dovish hike” in November.