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The year ends with a bang: two all-important rate decisions amid ongoing political developments, especially in the US. We focus on the key events which involve the euro and the dollar.

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  1. Yellen’s last stand: Fed Chair Janet Yellen will hold her last post-rate decision press conference. They are expected to raise rates, but will they change the dot-plot? Powell may have to wait for his turn to make his mark. Inflation is too low and even the Fed has its doubts. Getting ahead of the curve is becoming harder. Wages remain subdued and we explain why and who is moving the salary needle. The NFP could confirm the current trends: low inflation, healthy job gains.
  2. ECB: Will Draghi drag the euro lower? He can certainly try with lower inflation forecasts and could succeed. Inflation has fallen in both the headline and the core. However, this may not last for too long.   Fundamentals support euro/dollar.
  3. Tax cuts + Trump trouble: Politics provides good and bad news for the US dollar. The passage of the tax bill in the Senate paves the road for Trump signing it by year-end. There are still a few hurdles, but things are looking optimistic for a reconciliation. Will it help growth? A bit. At least it’s good for the dollar. On the other hand, Trump is in fresh trouble after Flynn crossed the lines. So far, it’s just another “buy the dip” scenarios.
  4. Euro-politics: Germany still lacks a government, but things seem relatively smooth. The EU is still united around Brexit and growth is robust.
  5. Preview: Apart from the NFP, Fed, and ECB, we should note the buildup to the NFP, ongoing negotiations to finalize the tax bill, and also rate decisions in Australia and in Canada.

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Trade safely!