There will be a significant amount of volatility over the 36 hours with the release of the November US CPI at today and the Federal Open Market Committee (FOMC) tomorrow. Given that last month's CPI release was a major trigger for the dollar sell-off, all eyes will be on today's figure. Today's release will set the dollar tone for tomorrow's FOMC meeting and into the first quarter of 2023. Several analysts suggest the market is being a little early in pricing 50bp of rate cuts for 2H23 and could see the dollar bouncing on any upside surprise in today's CPI data – including upward revisions to last month's reading. There’s plenty at play over the next 36 hours. Check economic calendar events in real time.
With the Bank of Canada policy decision in the rear view mirror now, the CAD will be something of a spectator to this week’s events and subject to broader swings in risk appetite. We expect the loonie’s direction to be driven by US CPI and the FOMC over the next 36 hours. Overnight, the US dollar remained well within the 1.3560-1.3700 range that has dominated for the past week. The pair found support in late Asian turnover in front of CAD 1.3600. Initial resistance is seen in the CAD 1.3640-50 area. Observe the USD/CAD trends.
CPI and FOMC inputs into the dollar equation will be a key driver of EUR/USD into year-end and early 1Q23. Based on current technicals, the 1.0600/10610 area is key resistance. A close above that on a soft US CPI release could see the EUR/USD drift up to 1.08 and even 1.0950/1.1000. On the downside 1.0350 seems to be the major support level.
The latest UK jobs data for November showed that payroll increased more than double what was expected and the weekly earnings rate nudged up to 6.1% YoY, the highest in a year. This adds to thoughts of a full employment recession and supports some of the more hawkish pricing of the Bank of England (BoE) policy cycle. It is probably not enough to prompt the BoE into another 75bp hike on Thursday but will support the GBP.
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