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US retail sales increased 0.3% for November after a revised 1.8% increase the previous month and below consensus forecasts of 0.8%. Underlying sales increased 0.3% and below market expectations of a 0.9% increase. The control group recorded a 0.1% decline after an October increase of 1.8% with limited market impact.

The Euro was unable to make any headway and drifted lower into the European close as the dollar maintained a firm tone ahead of the Federal Reserve policy decision.

The Federal Reserve held interest rates in the 0.00-0.25% range at the latest policy meeting. It announced that the pace of tapering of bond purchases would be doubled to $30bn per month from January which would result in purchases being completed in March if there are no further changes.

In the revised set of economic projections, a majority of Fed members expected three rate increases in 2022 with a median average Fed Funds rate of 0.9% compared with the previous estimate of 0.3%. The median projection is for a further three rate hikes in 2023 with an average rate of 1.6% from 1.0% previously.

The dollar strengthened after the tapering announcement and revised economic projections as markets priced in an earlier rate hike.

Chair Powell stated that the economy was strong enough to cope with the faster pace of tapering and the Fed remains committed to preventing high inflation with limits over the ability to push for maximum employment given the need to control inflation pressures. He also stated that there would not be a rate increase while the tapering process is underway, although there could be only a short gap after tapering is concluded. The statement was broadly optimistic over the outlook despite uncertainty.

Powell did add that rate hikes next year should not be considered a given and the rhetoric overall provided an element of relief, although positioning is likely to have had a more substantial impact given the hawkish tilt. The dollar dipped sharply with the Euro rallying from lows near 1.1220 to near 1.1300. Underlying dollar sentiment remained firm, but the Euro was around 1.1295 on Thursday and markets will also be watching the ECB policy guidance closely later in the day.


US Treasuries overall edged lower ahead of the Fed policy decision with the dollar edging higher to the 113.90 area amid a firm overall US tone.

The New York Empire manufacturing index edged higher to 31.9 for December from 30.9 the previous month and above expectations of 25.0. There was a slight slowdown in the rate of growth in new orders and shipments, but unfilled orders increased at a faster pace. Employment increased at a slower rate and there was a slight easing of supply-side difficulties while the rate of price increases also slowed slightly on the month. Companies remained optimistic over the outlook, but with inflation pressures expected to remain strong. Business surveys will continue to be watched very closely for evidence on the US growth and inflation outlook.

Long-term US bond yields increased only slightly after the Fed decision, but equities posted strong gains and the dollar pushed above 114.00 against the yen.

Japan’s PMI manufacturing index edged lower to 54.2 from 54.5 previously with the services index dipping to 51.1 from 53.0. Markets expect no change from the Bank of Japan on Friday. Risk appetite held steady with the dollar around 114.15 on Thursday as the yen failed to attract defensive support with the Euro around 128.85.


Sterling continued to strengthen after the latest UK inflation data with markets noting that pressure for a Bank of England tightening had increased and there was also some speculation that the central bank could decide to make a move this week despite major uncertainty surrounding the Omicron variant.

Risk appetite, however, remained fragile which curbed potential support and fears over the Omicron variant were also significant in sapping sustained support.

Sterling drifted towards 1.3200 against the dollar and dipped to test 2021 lows immediately after the decision before rallying to 1.3260 as the US currency retreated.

Sterling was unable to make further headway on Thursday with expectations that the Bank of England would decide against a move to raise interest rates this month, although there will be very choppy trading after the decision. Sterling settled just above 1.3250 as firm risk conditions provided support with the Euro around 0.8515.


The Swiss franc edged lower into the European close with some speculation that the National Bank would adopt a more dovish policy at the latest policy statement. Rates are expected to remain at -0.75% with rhetoric surrounding the currency important for overall franc sentiment. The Euro posted a net advance to 1.0440 after the Fed statement with the dollar posting a marginal net advance after an earlier peak just below 0.9300 after the Fed statement.

Overall risk appetite held steady on Thursday with markets continuing to monitor the central bank decisions and Omicron developments with the dollar around 0.9240.

Technical Levels

Today's Calendar



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