Dollar open the week mildly higher as supported by rate hike expectations. San Francisco Fed president John Williams said on Saturday that there is a "strong case" for rate hike. And recent "data have been overall encouraging, especially on the labor market". Nonetheless, he also noted that "the slope is the most important thing to communicate, the pace of increases". But he emphasized that Fed wouldn't want to indicate a "very mechanical path of interest rates" as "economic data can surprise on the upside and the downside". As of Friday, fed fund futures are pricing in 74% chance of rate hike by Fed in December. Technically, dollar is still staying in tight range against Euro, Swiss Franc and Yen. Some additional momentum is needed to resume recent rally.
On the other hand, Euro is pressured by expectation of further stimulus by ECB in December. And some analysts noted that the common currency would stay soft going into ECB meeting. Last Friday, ECB president Draghi noted that the central bank is ready to act swiftly to boost inflation in Eurozone. And he highlighted there could be changes to the asset purchase program and deposit rate. Draghi had made it clear in last post meeting press conference that policy makers will re-examine the current stimulus program in the upcoming meeting.
Looking ahead, the economic calendar is quite busy this week but the data releases are unlikely to change the current trend in the forex markets. Here are some highlights for the week ahead:
- Monday: Eurozone PMIs; US existing home sales
- Tuesday: Japan PMI manufacturing; German Ifo, GDP final; Swiss employment level; US GDP revision, trade balance, consumer confidence
- Wednesday: BoJ minutes, CSPI; Swiss UBS consumption; US durable goods, jobless claims; personal income and spending, new home sales
- Thursday: New Zealand trade balance; Eurozone M3, German Gfk consumer sentiment
- Friday: Japan CPI UK GDP revision; Canada IPPI, RMPI