Weekly Outlook: 2017, December 10 - December 17

The US dollar continued enjoying the optimism from the tax cuts and was not hit hard by the data. Can it continue higher? Four rate decisions await us: the SNB, ECB, BOE, and the FED, with Yellen’s last post-rate decision press conference. Can the dollar continue higher? Here are the highlights for the upcoming week.

1. UK inflation: Tuesday, 9:30. Expectations still remain high at 3%.
2. US PPI: Tuesday, 13:30. Another rise of 0.4% in headline PPI is predicted. Core PPI carries expectations for 0.2%.
3. US Inflation: Wednesday, 13:30. A rise of 0.4% is projected for headline CPI and +0.2% for core CPI.
4. US rate decision: Wednesday, 19:00, press conference at 19:30. The Fed is expected to raise rates for the fifth time in the cycle and third time this year. The hike from to a range of 1.25% to 1.50% has been well-telegraphed for a long time. This time, the Fed also releases forecasts for inflation, employment, growth, and interest rates. At the moment, the central bank foresees three additional hikes in 2018. Will they stick to their guns? Markets are skeptical, but they will probably signal continuity before Powell makes his own mark. However, this is an open question as inflation remains low. Outgoing Fed Chair Janet Yellen initially shrugged off lower price rises as “transitory“, then called it “a mystery” and eventually admitted that it might not necessarily be that transitory. What are her views this time? Apart from the forecasts, the tone of the statement and her press conference, her last post-rate decision statement, will be telling. We can expect incoming Chair Jerome Powell to vote with the majority as always and we can expect Neel Kashkari of the Minnesota Fed to dissent, as he previously did earlier in the year. The Fed will try not to rock the boat too much, but markets may cling to any small semantic change in the statement, a shift in the projections, or Yellen’s tone to try and look into 2018.
5. Australian jobs report: Thursday, 00:30. A gain of 19.2K is on the cards and the unemployment rate carries expectations for remaining at 5.4%.
6. Swiss rate decision: Thursday, 8:30. change in policy is unlikely, and will likely lead to a stronger franc. Many traders are still reeling from the January 2015 SNBomb.
7. UK rate decision: Thursday, 12:00. A unanimous “no-change” vote is more likely among the 9-member Monetary Policy Committee ahead of the holidays.
8. Euro-zone rate decision: Thursday, 12:45, press conference at 13:30. As usual, Draghi will continue his balancing act. If he talks about ending QE after September, the euro will jump, but this is unlikely. The ECB can wait until around June to make such future announcements.
9. US retail sales: Thursday, 13:30. A gain of 0.3% is forecast in headline retail sales and +0.7% in core sales.

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