American FX Outlook: Fed hiking rates, Trump advocating tax bill headline with US CPI

What you need to know

• The US President Donald Trump will be speaking publicly on Wednesday trying to push through the US tax bill that is currently disputed in House and Senate with Republican majority trimmed to 51-49 after losing Alabama last night.
• The UK November labor market report came in mixed with the unemployment rate dwelling at 4.3% and average earnings rising 2.3% over the year.
• The US CPI report will be important for markets to follow to what extent the factory gate inflation increase is fed into consumer prices to appease Federal Reserve in their policy normalization march. 
• The Federal Reserve is widely expected to hike interest rates later on Wednesday but beware of fresh economic projections and Janet Yellen press conference for further clues about expected economic development and future monetary policy in the US. 

Wednesday’s market moving events

• The US headline CPI is expected to rise 0.4% m/m and rising 2.2% y/y. After food and energy adjustment the core CPI is seen rising 0.2% m/m and 1.8% over the year in November.
• The US President Donald Trump will give tax speech Wednesday as House and Senate Republicans are working to resolve the differences between their two tax bills to prompt them to produce a final piece of legislation. 
• The FOMC is expected to hike the US rate by 25 basis points to 1.50% at 19:00 GMT. The FOMC meeting will publish also fresh economic projections and will be followed by the Fed chair Janet Yellen press conference. Read the preview here.
• Fed governor Lael Brainard delivers opening remarks at an awards ceremony hosted by the Federal Reserve Bank of New York, in Rochester, New York at 23:00 GMT. 

Major market movers

• The US Dollar retreated somewhat against the major counterparts after Alabama Senate elections cut the Republican majority in the US Senate to narrow 51-49.
• Sterling retraced from the key support of $1.3320 in anticipation of positive UK labor market report but failed to add any gains after the report came out mixed.
• Major market volatility is expected with the FOMC raising the interest rates and even more importantly releasing the fresh bout of economic projections.

Earlier in Asia/Europe

• The Alabama Senate elections saw Democratic candidate Doug Jones defeats Republican Roy Moore that will trim Republican majority in the US Senate to 51-49.
• German wholesale prices rose 0.3% m/m while rising 3.3% over the year in November.
• German CPI increased 0.3% m/m while rising 1.8% y/y in November.
• The UK labor market report saw the number of unemployment benefit seekers rising 5.9K in November up from 3.2K expected.
• The UK unemployment rate remained at the lowest level since 1975 at 4.3% for three months ending in October while average earnings excluding bonuses rose 2.3% y/y in October. 
• The Bank of Japan Governor Haruhiko Kuroda said that Japan's economy is in "very good shape" with the BoJ guiding monetary policy appropriately reflecting the state of the economy in hope of Japan's economy remaining stable, and prices and wages rising gradually next year.
• The Eurozone industrial production rose 0.2% m/m while rising 3.7% y/y in October.
• The Eurozone employment rose 0.4% q/q in Q3 2017, in line with expectations.