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US inflation and central banks coming up next

What you need to take care of on Tuesday, December 13:

The US Dollar started the week on the back foot but changed course during the American session to end the day with uneven gains against its major rivals. Asian and European indexes closed in the red, while Wall Street managed to post gains after a tumultuous week.

Action, however, was limited amid a scarce macroeconomic calendar and ahead of several first-tier events, starting Tuesday with an update on US inflation, then followed by monetary policy decisions from the US Federal Reserve, the Bank of England and the European Central Bank.

The New York Federal Reserve released the Survey of Consumer Expectations, which showed that inflation expectations have fallen for the year ahead, although they remain elevated. At the same time, the survey indicated that expected inflation marked a record month-to-month decline in November, while the median inflation uncertainty decreased in the short and medium term.

The EUR/USD pair settled at around 1.0520 after peaking at 1.0580. The GBP/USD pair trades around 1.2250, unable to extend gains beyond 1.2300 despite generally positive UK data. The October Trade Balance posted a deficit of £14.476 billion, while the monthly GDP rose by 0.5%, beating the 0.1% decline expected.

The Australian dollar edged lower against its American rival, with AUD/USD currently trading at around 0.6740. The USD/CAD pair lost some ground and settled at 1.3636, as the Canadian Dollar benefited from strengthening oil prices. Exports from Russia’s Black Sea terminals were suspended on Saturday amid a storm in the region, boosting prices. WTI currently trades at $73.10 a barrel.

China further relaxed its coronavirus-related restrictions but there was little market reaction to the positive headline.

The US Dollar surged against safe-haven rivals. USD/JPY trades around 137.80 while spot gold battles around $1,780.

The US will release the November Consumer Price Index on Tuesday. Annual inflation is foreseen at 7.3%, easing from the previous month’s 7.7% rate, while the core CPI, which excludes volatile food and energy prices, is expected to have risen by 6.1%.  On Wednesday, the US Federal Reserve (Fed) will announce its decision on monetary policy, while the European Central Bank (ECB) will do the same on Thursday. Both central banks are expected to hike rates, although the extent of such hikes is uncertain. The Fed may slow the pace of tightening and proceed with a 50 bps hike, while the ECB may finally turn hawkish.

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