Here is what you need to know on Thursday, December 15:
Following the highly volatile action witnessed during the American trading hours on Wednesday, markets stay relatively quiet early Thursday with investors gearing up for the Bank of England and the European Central Bank policy announcements. The Swiss National Bank will also unveil its interest rate decision and the US economic docket will feature Retail Sales and Industrial Production data for November alongside the weekly Initial Jobless Claims and the NY Fed's Empire State Manufacturing Survey.
As expected, the Federal Reserve hiked its policy rate by 50 basis points to the range of 4.25-4.5% following its December policy meeting. The revised Summary of Economic Projections (SEP) showed that the median terminal rate projection rose to 5.1% from 4.6% in September's SEP. Although the initial market reaction to the hawkish dot plot provided a boost to the US Dollar, the currency lost its strength during FOMC Chairman Jerome Powell's press conference. Powell said no one knew if the US economy would tilt into a recession next year or not and added that they could revise the peak rate projection lower if they continued to see soft inflation data. The US Dollar Index (DXY) fell to its weakest level in six months at 103.44 late Wednesday and the 10-year US Treasury bond yield retreated below 3.5%. The risk-averse market environment helps the US Dollar stay resilient against its rivals in the European session on Thursday with the DXY clinging to modest recovery gains slightly below 104.00.
Earlier in the day, the data from China showed that Retail Sales contracted at an annual rate of 5.9% in November, missing the market expectation for a decrease of 3.6%. Additionally, Industrial Production expanded by 2.2% in the same period, compared to analysts' estimate of +3.6%:
Australian Bureau of Statistics announced on Thursday that the Unemployment Rate stayed unchanged at 3.4% in November with the Employment Changed coming in at +64K. Nevertheless, AUD/USD struggled to capitalize on the upbeat data and declined toward 0.6800, pressured by the risk-averse market environment and dismal macroeconomic figures from China.
Similarly, NZD/USD stays on the back foot and trades in negative territory below 0.6450. The data from New Zealand revealed that the Gross Domestic Product expanded at an annual rate of 6.4% in the third quarter, beating analysts' projections of 5.5%.
EUR/USD came within a touching distance of 1.0700 late Wednesday before retreating toward 1.0650 on Thursday. The ECB is widely expected to raise its policy rate by 50 bps. Hence, investors will pay close attention to revised quarterly projections and President Christine Lagarde's comments on QT and the policy outlook.
ECB Preview: Five reasons to expect Lagarde to lift the Euro with a hawkish hike.
GBP/USD touched its highest level since early June near 1.2450 on Wednesday but lost its traction. As market participants gear up for the BOE rate announcements, the pair trades in negative territory slightly below 1.2400.
BoE Interest Rate Decision Preview: Focus on vote split amid high inflation and economic gloom.
USD/JPY struggled to make a decisive move in either direction on Wednesday and closed the day flat. The pair clings to modest daily gains above 135.70 in the European morning.
USD/CHF slumped to its lowest level since late March at 0.9216 late Wednesday but managed to stage a rebound. The pair holds above 0.9250 so far on Thursday. The SNB is expected to raise the policy rate by 50 bps to 1% but some experts think that the bank could opt for a 75 bps hike instead.
Bitcoin rose to its highest level in over a month near $18,400 on Wednesday but erased its daily gains before closing flat below $18,000. BTC/USD edges lower early Thursday and trades near $17,700. Ethereum lost nearly 1% on Wednesday and is already down more than 1% on Thursday, trading slightly below $1,300.
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