While yesterday's job data gave the greenback a lift, the momentum was brief as dollar pared back much of the gains after comments from Fed chair Janet Yellen. In short, Yellen emphasized that the upcoming economy data could still sway Fed sway from the highly anticipated rate hike later this month. She noted that between now and the next FOMC meeting, there will be "additional data that bear on the economic outlook" and policymakers " will assess all of the available data and their implications for the economic outlook in making our policy decision." Meanwhile, regarding the economy, she anticipated "continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labour market slack and a rise in inflation to our 2 per cent objective."
On the other hand, Atlanta Fed president Dennis Lockhart noted that "absent information that drastically changes the economic picture and outlook, I feel the case for liftoff is compelling." San Francisco Fed president John Williams said that "the next appropriate step is to raise rates" and his "preference is sooner rather than later." Also from US, Fed's Beige Book revealed modest, moderate or steady growth in 10 of its 12 districts. With conditions leveled off in New York and some what slower in Boston.
Canadian dollar stayed in established range after BoC left the overnight rate target unchanged at 0.5%, for a 5th consecutive meeting, in December. The Bank Rate also stayed unchanged at 0.75% and the deposit rate at 0.25%.The tone delivered in the accompanying message was largely the same as the October one, though with some tweaks. Overall, the BOC remained dovish as it has been since the beginning of the year. We expect the central bank to keep its monetary stance unchanged for most of next year. More in BOC Keeps Its Powder Dry, Possibly For Most Of 2016.
ECB rate decision and press conference is the major focus today. Markets are expecting ECB to announce expansion of policy easing. Those measure might include extending the current EUR 60b per month asset purchase through original end of September 2016. Also, ECB could even increase the size of the purchase as well as include additional assets for the purchases. Meanwhile, there are also talks that ECB would further lower the deposit rate, which currently stands negative at -0.2%.
On the data front, Australia trade deficit widened to AUD -3.31b in October. UK PM services and Eurozone retail sales will be released in European session. US will release jobless claims, factory orders as well as ISM services.