It’s an absolute blockbuster of a week for both central bank meetings and top-tier economic data:

Monday, December 12

• JPY: Japan November PPI
• GBP: UK October monthly GDP, industrial production, manufacturing production

Tuesday, December 13

• AUD: Australia November household spending, December consumer confidence
• EUR: Germany November CPI (final print), December ZEW survey expectations
• GBP: UK October unemployment rate, November jobless claims
• USD: US November CPI - consumer price index

Wednesday, December 14

• GBP: UK November CPI
• EUR: Eurozone October industrial production
• USD: Fed rate decision
• Crude: EIA weekly oil inventories

Thursday, December 15

• NZD: New Zealand Q3 GDP
• AUD: Australia November unemployment, December inflation expectations
• CNH: China medium-term lending rate; November industrial production, retail sales, the jobless rate
• CHF: Swiss National Bank rate decision
• NOK: Norway’s Norges Bank rate decision
• GBP: Bank of England rate decision
• EUR: European Central Bank rate decision
• USD: US weekly initial jobless claims, November retail sales, industrial production

Friday, December 16

• AUD: Australia December PMIs
• GBP: UK November retail sales; December PMIs and consumer confidence
• S&P 500: ‘Triple witching day’ for US markets
• USD: Deadline for avoiding US government shutdown

Most of the spotlight will inevitably be on the Federal Open Market Committee (FOMC) which concludes its last meeting of 2022 on Wednesday.

Money markets price in a 50bp rate hike after four straight 75bp moves.

The market theme since mid-October has been that the Fed won’t be as aggressive against inflation as it says it will. This would then leave scope for policymakers not to slam on the brakes against the background of a looming recession.

In this environment, financial conditions have loosened with the dollar down over 6% so far this quarter as US Treasury yields have fallen, while stocks have been well-bid off the October lows.

But this is not what the Fed wants to see as it fights still-high inflation.

Recent messaging from officials has also been that interest rates will stay high for some time. This means the overall tone and language in Chair Powell’s press conference will be key, and the peak rate in the new dot plot will be a focus with expectations that it will rise above 5% from 4.6% in the September projections.

Lower-than-expected US inflation could prompt more dollar declines

The dollar has been languishing near its cycle lows recently with the upside capped at the 200-day simple day moving average at 105.74.

A second consecutive low print in the latest US core CPI number released on Tuesday would certainly help the long-standing “pivot” narrative and probably push the DXY to new depths beneath its recent cycle low at 104.06.

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