Here is what you need to know on Thursday, December 16:
The greenback weakened against its rivals late Wednesday amid a ‘buy the rumour sell the fact’ market action following the US Federal Reserve’s decision to speed up the asset taper. The US Dollar Index is currently consolidating its losses as investors await the Europen Central Bank’s (ECB) and the Bank of England’s (BOE) policy decisions. In the second half of the day, weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey and Industrial Production data will be featured in the US economic docket.
European Central Bank Preview: More recalibration or actual tightening?
Meanwhile, the USD/TRY pair reached a new record high above 15 earlier in the day and the Turkish lira has lost more than 50% against the dollar since early November. The Central Bank of the Republic of Turkey (CBRT) will announce the rate decision later in the session.
The Fed decided to double the pace of asset taper to $30 billion per month as expected. The Summary of Economic Projections revealed that policymakers now see three rate hikes in 2022. Although the greenback gathered strength against its rivals with the initial reaction, it struggled to preserve its bullish momentum during Chairman Powell’s press conference. Powell noted that it would not be appropriate to hike the policy rate before the taper is completed.
The ECB is expected to confirm that they will end the Pandemic Purchase Emergency Programme by March but investors anticipate the bank to introduce a new tool or increase the amount of purchases in the Asset Purchase Programme to continue to support the economy.
ECB December Preview: How will ECB replace PEPP?
Following the hot inflation report from the UK, markets ramped up the probability of a 15 basis points BOE rate hike. Heightened concerns over the Omicron variant hurting the economic activity, however, could cause the central bank to adopt a cautious tone and deliver a “dovish hike.”
BOE Preview: Omicron eliminates rate hike chances, voting pattern critical to GBP/USD reaction.
EUR/USD closed in the positive territory on Wednesday and stays relatively quiet below 1.1300 ahead of ECB.
GBP/USD rose toward the upper limit of its weekly range in the American session on Wednesday and stays relatively quiet above 1.3250 early Thursday.
Gold staged an impressive rebound after dropping to a fresh two-month low near $1,750. However, XAU/USD continues to trade below $1,800 for the time being.
USD/JPY is trading at its highest level in three weeks above 114.00 on Thursday. The benchmark 10-year US Treasury bond yield registered modest gains on Wednesday but stays below the critical 1.5% mark.
Bitcoin closed in the positive territory for the second straight day on Wednesday and continues to close in on $50,000. Ethereum rose more than 4% and seems to have settled slightly above $4,000 for the time being.