We started the penultimate FOMC day with a bout of modest Dollar selling pressure in the morning and late the night before. EUR/USD crept up to a month high before retracing back to Monday’s levels. The volatility is mainly due to market participants becoming slightly more nervous ahead of today’s pivotal FOMC meeting.
Data wise, we had two key pieces of high tier releases. UK CPI moved back into positive territory at 0.1%, as expected and returned above zero in November for the first time in four months. Although a return to a positive figure, the continued slump in oil prices still sees inflation to drag well below the BoE’s 2% target, thus not moving the Pound. Yesterday afternoon also saw the US release their inflation figure, which fell in line with market consensus dropping to 0.0% in November. Although inflation is a key gauge, this release had little impact on the market as all attention is on the Fed tomorrow evening.
The Fed are expected to raise rates tonight for the first time since June 2006. This month’s highly anticipated labour data suggested that the US remain on track to raise rates this month after non-farm payrolls rose 211k in November with a 35k of upward revisions to the prior two months. A solid data trend has pushed the probability of a hike to 78% according to Bloomberg. However, all will be revealed tonight at arguably the biggest meeting of the year. Also on Wednesday’s docket we have a raft of Eurozone PMI data and some key labour data from the UK, in the form of the unemployment rate and average earnings index.