Summary:

• Fed is expected to raise interest rates for the third time this year, investors are looking for hints on the policy path for the next year
• US CPI figures will be also an important factor for the USD today
• The report from the UK labour market takes the stage this morning

 Undoubtedly, the Fed meeting is the most important market event today, as the Federal Reserve is expected to lift interest rate for the third time this year and there are many uncertainties surrounding the policy path for the next year. However, it’s not the only key point for the USD as we get the US CPI figures as well. GBP will come into focus in the upcoming hours as the report from the UK labour market will be released this morning. Oil traders should await monthly Opec Report and DoE inventory data which could confirm a large drop in the crude stocks suggested by API estimates. 

9:30 am BST – UK, labour report. The GBP has been driven so far by politics rather than macroeconomics recently, although this changes this week. We got inflation figures yesterday that surprised to the upside putting pressure on BoE to take a more hawkish stance. The rising costs of living bite into real incomes of the British consumers thus is crucial for the economy, which is strongly dependent on consumption, to see a pick-up in wages. Average earnings excluding bonuses are expected to rise to 2.5% y/y from 2.2%, whilst the unemployment rate is seen declining to 4.2% from 4.3%. 

1:30 pm BST – US, the CPI figures for November. Inflation is the biggest concern for Fed regarding a path of monetary policy. Despite a stellar condition of the labour market, the inflationary pressure has been subdued. However, CPI may surprise to the upside given another strong increase in PPI numbers. The consensus assumes that the headline CPI will reach 2.2% yoy meaning a slight growth from 2.0% yoy seen in September, nevertheless one needs to take into consideration that a base effect should eat into price growth in the upcoming months. In turn core CPI is forecast to come in at 1.8% yoy, in line with the prior release.

3:30 pm BST – US, DoE oil inventory data. The API reported yesterday evening the largest draw in the crude stocks in 4 months which helped prices recovered. Thus, the bar of expectations is set high. Moreover, investors will also look at gasoline and distillates inventories. We also should get a monthly OPEC report on perspectives for the global oil market.

7:00 pm BST – US, Fed interest rate decision and a press conference of Janet Yellen at 7:30 pm. Market participants have already fully priced in Fed a rate hike at today’s meeting, so attention will be paid to projections for 2018 where three more hikes have been communicated so far by the US central bank. Keep in mind that this will be also the last post-meeting conference held by Janet Yellen –  Jerome Powell takes her place in February.

8:00 pm BST – US, President Donald Trump is scheduled to release a speech on tax reform. It seems important given that House of Representatives and Senate still have some details to hash out between their versions of the tax bill.  Moreover, the Republican debacle in Alabama Senate vote also could make it harder to implement the reform. 

USD index (USDIDX) is moving within a short-term uptrend. The Fed meeting and inflation data will be crucial for the US dollar near-term outlook. Source: xStation5