Markets maintained their usual intraday volatility last week, however, they had relatively undramatic closing levels compared to the previous two weeks. Wall Street was still trading over 1000 points lower than levels seen at the start of the month, with the signature German index some 670 points down from the start of December - casting the seasonal stock market phenomenon known as the ‘Santa Rally’ into doubt. Progress between the US and China regarding trade, the EU commission and Italy on the budget deficit and Brexit negotiations between the UK Government and the EU will be key in monitoring further moves in global indices.

GBPUSD made a recovery from a 20-month low, as British Prime Minister Theresa May survived a no-confidence vote on her leadership that will allow her to press ahead with an attempt to salvage her deal for Britain to exit the European Union. Following on from the FOMC expected rate hike in the US on Wednesday evening, the Bank of England will be announcing their latest stance on monetary policy on Thursday at 12:00. Although no change is expected, any comments surrounding post-Brexit policy could see exaggerated moves. UK data worth paying attention to throughout the week will be CPI on Wednesday, and Gross Domestic Product and the BoE Quarterly Bulletin on Friday.

USDJPY is likely to be in focus Wednesday evening/Thursday morning. The USD has been relentless in its march against most currencies and the JPY is no exception. Trading close to 1% from 2018 highs vs the Yen, the greenback is likely to come under scrutiny on Wednesday evening at 19:00 when the FOMC of the Federal Reserve will announce the latest interest rate decision. It is widely expected that we will see an increase of 0.25% to the interest rate. Direction will likely follow the FOMC Press Conference at 19:30, when members of the press will probe for answer regarding monetary policy into 2019. The questions often lead to unscripted answers that can create heavy market volatility. At 02:00 on Thursday, the Bank of Japan will also be delivering an Interest Rate Decision, Monetary Policy Statement and Press Conference. Traders will need to be mindful of any USDJPY positions being held overnight.

EURUSD has recently been affected by Italy’s ongoing budget deficit which, other than Brexit, has been one of the main focal points for the European Commission. Slight optimism grew on hopes that Italy could reach a compromise with the European Commission over its 2019 budget. Italy hoped it could reach a deal by agreeing to a deficit of between 2.0-2.2% of GDP, down from the original suggestions of 2.4%. Also contributing to volatility has been the European Central Bank’s commitment to ending its lavish bond purchase scheme. Overall inflation, the ECB’s primary objective going forward, may be near the target now and slightly above it in Germany, where prices grew by 2.2% in November. Euro Zone Consumer Price Index data released on Monday at 10:00 could be key to watch as this is one of the main inflation gauges the ECB monitor to assess monetary policy forward guidance.

Brent Crude Oil prices steadied last week, under pressure from high inventories but helped by a drawdown in U.S. crude stockpiles and indications that the trade war between the United States and China may be easing. Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November. But the Organization of the Petroleum Exporting Countries (OPEC) and other big producers, including Russia, agreed last week to reduce supply to try to trim the surplus. EIA Crude Oil Stocks Change will be important data to watch on Wednesday at 15:30.

All times indicated above are GMT.


ECONOMIC CALENDAR (all times are BST)

Monday, 17th December

10:00 EUR Consumer Price Index

11:00 GBP CBI Industrial Trends Survey – Orders

13:30 USD NY Empire State Manufacturing Index

Tuesday, 18th December

00:30 AUD RBA Meeting Minutes

09:00 GER IFO - Current Assessment

09:00 GER IFO - Expectations

09:00 GER IFO - Business Climate

13:30 USD Housing Starts

21:30 USD API Weekly Crude Oil Stocks

23:50 JPY Imports/Exports

Wednesday, 19th December

04:30 JPY All Industry Activity Index

07:00 GER Producer Price Index

09:30 GBP Retail Price Index

09:30 GBP Producer Price Index

09:30 GBP Consumer Price Index

13:30 CAD Bank of Canada Consumer Price Index

14:00 CHF SNB Quarterly Bulletin

15:00 USD Existing Home Sales

15:30 USD EIA Crude Oil Stocks Change

19:00 USD FOMC Economic Projections

19:00 USD Fed’s Monetary Policy Statement

19:00 USD Fed Interest Rate Decision

19:30 USD FOMC Press Conference

22:45 NZD Gross Domestic Product

Thursday, 20th December

02:00 JPY BoJ Monetary Policy Statement

02:00 JPY BoJ Interest Rate Decision

02:00 JPY BoJ Press Conference

07:00 CHF Imports/Exports

09:30 GBP Retail Sales

12:00 GBP BoE Asset Purchase Facility

12:00 GBP BoE Interest Rate Decision

12:00 GBP BoE MPC Vote Cut/Hike/Unchanged

12:00 GBP BoE Monetary Policy Summary

12:00 GBP Bank of England Minutes

13:30 USD Initial Jobless Claims

13:30 USD Philadelphia Fed Manufacturing Survey

23:30 JPY National Consumer Price Index

 

Friday, 21st December

07:00 GER Gfk Consumer Confidence Survey

09:30 GBP Gross Domestic Product

12:00 GBP BoE Quarterly Bulletin

13:30 USD Personal Consumption Expenditures

13:30 USD Gross Domestic Product

13:30 USD Durable Goods Orders

13:30 CAD Retail Sales

15:00 USD Michigan Consumer Sentiment Index

15:00 EUR Consumer Confidence

18:00 USD Baker Hughes Oil Rig Count