Forecasting the upcoming week: Winter Holiday blues after Central Banks’ frenzy
The US Dollar Index (DXY) is on a three-day winning streak, although gains are modest, the index is heading into the weekly close near the 98.60 price region, after a softer-than-expected United States (US) Consumer Price Index (CPI) was released on Thursday, briefly weighing on the US Dollar. Doubts about the quality of the inflation slowdown arose on Friday, following comments from Federal Reserve (Fed) John Williams, who noted that CPI data “may have been pushed down a bit” when speaking on CNBC. The Fed announced its monetary policy decision on Wednesday, and as expected, policymakers cut the interest rate by 25 basis points (bps)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.06% | 1.20% | -0.01% | -0.08% | 0.16% | 0.09% | |
| EUR | -0.00% | -0.07% | 1.22% | -0.02% | -0.08% | 0.17% | 0.09% | |
| GBP | 0.06% | 0.07% | 1.26% | 0.05% | -0.02% | 0.23% | 0.15% | |
| JPY | -1.20% | -1.22% | -1.26% | -1.18% | -1.26% | -1.02% | -1.09% | |
| CAD | 0.01% | 0.02% | -0.05% | 1.18% | -0.08% | 0.16% | 0.10% | |
| AUD | 0.08% | 0.08% | 0.02% | 1.26% | 0.08% | 0.25% | 0.17% | |
| NZD | -0.16% | -0.17% | -0.23% | 1.02% | -0.16% | -0.25% | -0.08% | |
| CHF | -0.09% | -0.09% | -0.15% | 1.09% | -0.10% | -0.17% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Additionally, data released by the US Department of Labor (DOL) on Thursday indicated that the number of Americans filing new unemployment claims rose to 236,000 for the week ending December 13. There were 224,000 Initial Jobless Claims, a decrease of 13,000 from the previous week's revised level, the US Department of Labor (DOL) reported on Thursday. This reading came in better than the market expectation of 225,000.
EUR/USD: The pair is trading near the 1.1740 price zone after the European Central Bank (ECB) left interest rates unchanged and ECB President Christine Lagarde refused to commit to any particular rate path on Thursday. Lagarde affirmed that the decision was taken unanimously and that there was no discussion of changing interest rates.
The GBP/USD pair is trading near the 1.3380 price region, ending the week pretty much unchanged. Sales in the United Kingdom (UK) rose by 0.6% YoY in November, unchanged from the previous print but missing estimates of a 0.9% expansion. On a monthly basis, figures fell by 0.1%, below forecasts of a 0.4% expansion. The Office for National Statistics (ONS) reported a day after the Bank of England (BoE) cut rates due to cooling inflation. The BoE cut the interest rate by 25 (bps) to 3.75% from 4%, as expected. The monetary policy statement showed policymakers are less worried about inflation than the numbers suggested, leading to some Sterling Pound gains.
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USD/JPY is trading near the 157.30 price region, nearing a one-month high as Bank of Japan (BoJ) members unanimously voted to raise the policy rate by 25 bps to 0.75% (widely expected) and reinforced their tightening bias.
AUD/USD is trading near the 0.6620 price region, as data released in Australia earlier this week showed that Consumer inflation expectations rose to 4.7% in December from 4.5% in November. Meanwhile, the case that the RBA might hike interest rates in the first quarter of 2026, but the impact on the Aussie has been minimal.
USDCAD trades in the 1.3780 price region on the Canadian side; domestic data offered little support to the Loonie. Statistics Canada reported that Retail Sales fell by 0.2% MoM in October, missing market expectations for a flat reading and improving from September’s sharp 0.9% decline.
Gold is little changed, still on the greener side of the grass as a dovish Fed outlook and persistent geopolitical risks continue to provide a steady tailwind for prices, keeping the metal on track to end the week with modest gains.
Anticipating economic perspectives: US updates and Japanese data
The UK will release the final estimate of the Q3 Gross Domestic Product (GDP) on December 22.
The United States will publish the October Durable Goods Orders and a preliminary estimate of Q3 GDP on December 23.
The Christmas Holidays will put most of the macroeconomic calendar on pause, except in Japan. The Asian country will release the December Tokyo Consumer Price Index (CPI) data and Retail Trade figures on December 25, when BoJ Governor Kazuo Ueda will also offer a speech.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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