Today marks the end of November, and what a month it was! The world received positive vaccine news three weeks in a row, triggering a rally on the stock market and on the price of oil.
As usual, the first week of the new month brings with it the jobs data in the United States on Friday, but this is not the only important event of the month, as both the ECB and the Fed are scheduled to announce their interest rate decisions.
NFP Friday
The new month starts with the NFP release on the first Friday, as usual. If we are to interpret the initial jobless claims released through November, the chances are that the NFP will miss the target on Friday. However, until Friday, the Fed’s Chair Powell is scheduled to testify in front of the Senate and his words may bring increased volatility on the USD pairs.
Speaking of the USD, it trades with a weak tone across the board. It lost ground against all G10 currencies, and the slide looks poised to continue. The EURUSD pair has pulled a monster rally recently, trading close to the 1.20 level with little or no corrections during the month of November.
ECB Next Week
All eyes will be on the ECB decision next week. The central bank is expected to ease the monetary policy further, even though it ruled out further interest rate cuts. As such, the market expects an increase in the QE programs as well as improved conditions on the TLTRO terms.
However, despite the ECB expressing concerns about a strong EURUSD rate, the pair is back at 1.20, where the ECB intervened verbally last time. Will it intervene again?
Fed Meeting – The Last Important Event for December
One week after the ECB interest rate decision and press conference, the last important event for the month is scheduled on a Wednesday – the Fed statement and press conference.
The market expects the Fed to ease as well, and the focus would be on the differential between the two central banks’ measures. If the Fed engages in the so-called “operation twist,” it signals that it will further increase the pressure on long-term yields. The market also expects an increase in the QE program in the United States too.
All in all, the month of November was dominated by a weak USD. Expect the next three weeks to be crucial for the USD direction.
