American FX Outlook: US retail sales set to rise as Christmas nears

What you need to know

• The US Federal Reserve hiked the rates by 25 basis points in line with expectations but remained dovish with two FOMC members dissenting the decision and three rate hikes projected for 2018. 
• People’s Bank of China followed Fed with raising short-term interest rates for 7-day and 28-day repo operations by 5 basis points.
• The US Dollar fell across the board on Fed raising rates as markets saw the move being dovish with the short-term economic projections lifted by the US tax reform but giving the economy and the inflation long-lasting boost. 
• The UK retail sales rose unexpectedly by 1.1% m/m n November boosted by Black Friday sales.
• The Eurozone manufacturing activity rose to record high in December but failed to support EUR.
• The Bank of England and the ECB policy decision are due today, with both central banks seen staying on hold with the monetary policy arsenal while markets are likely to monitor closely what they have to say. 

Thursday’s market moving events

• The Bank of England is expected to hold the Bank rate and monetary policy tools unchanged in December.
• The ECB is expected to keep interest rates unchanged while in has pre-announced tapering of its asset purchasing program since January back in November.
• The US retail sales are expected to rise 0.6% m/m with the core retail sales expected to increase 0.3% m/m in November.
• The US initial jobless claims are seen rising by 239K in the week ending December 8.
• Canada’s new house price index is expected to rise 0.2% m/m in October
• The US manufacturing PMI is expected to accelerate to 54.0 in December and services PMI is seen rising to 55.0 in the same month.
• The Bank of Canada Governor Stephen Poloz is due to deliver a speech titled "Three Things Keeping Me Awake at Night" at the Canadian Club of Toronto at 17:25 GMT.

Major market movers

• The US Dollar is catching the breath after falling lower massively on what market sees as a dovish rate hike.
• Australian Dollar benefits from strong employment increase.
• EUR is unable to materialize the record high manufacturing activity in the Eurozone.
• GBP is up slightly as the UK retail sales rose above expectations, but gains are limited with the political fallout of PM May in a parliamentary vote on Wednesday. 

Earlier in Asia/Europe

• The UK Prime Minister Theresa May suffered a serious loss with her own Conservative party voting against the law ensuring the UK parliament to get a vote on the final Brexit deal at the end of negotiations in 2019.
• Australian employment rose 61.6K and the unemployment rate remained at 5.4% in November.
• China’s retail sales increased 10.2% y/y in November.
• China’s industrial production rose 6.1% y/y in November.
• China’s central bank, the People’s Bank of China, raised the interest rates for the first time since mid-March in a surprising move after Fed. Both 7-day and 28-day repo rates were lifted by 5 basis points, while PBoC left 14-day repo rate unchanged. 
• French CPI rose 0.1% m/m and decelerated to 1.2% y/y in November.
• Spanish CPI increased 0.5% m/m and 1.7% y/y in November.
• Flash manufacturing PMI for France rose unexpectedly strongly to 59.3 in December, marking the highest level in 207 months while services PMI decelerated to 59.4 in the same month.
• Flash manufacturing PMI for Germany rose to an all-time high of 63.3 while services accelerated to a 24-month high of 55.8 in December. The composite PMI rose to 58.7, the highest level in 80-months in December.
• The Eurozone Flash manufacturing PMI is expected to 59.8 while services are seen edging down to 56.0 in December. The composite PMI is expected to decelerate to 57.2 from 57.5 in the previous month.
• The UK retail sales are expected to rise 0.4% m/m in October while rising 0.3% y/y.