OUR SUMMARY
This week, attention turns to Europe with the release of inflation data. Due to base effects from fuel prices, both Germany and France are expected to report higher inflation, alongside the overall EU CPI. However, the broader disinflation
trend is likely to persist, leaving market expectations for 100bps worth of rate cuts by the ECB this year largely unchanged.
In the US, job data will take center stage, culminating in Friday’s nonfarm payroll report. The market anticipates an addition of 153,000 jobs in December, with the
unemployment rate holding steady at 4.2%. Following the Fed’s December meeting, market pricing now suggests a modest 43bps worth of rate cuts in 2025. As long as the jobs data doesn’t show significant weakness, the USD is expected to remain supported in the medium term.
As market liquidity picks up with the return of traders, the USD is easing into the week. Any short-term correction in the dollar is expected to be brief, as the hawkish Fed stance and the approaching inauguration of Donald Trump are likely to continue bolstering USD support in the medium term.
