European FX Outlook: The Eurozone inflation set to remain well below ECB’s 2% target

What you need to know before markets open:

• Republicans in the US are confident that the tax bill will become law this week.
• The Asian equities followed the US S&P 500 index higher with the US lawmakers optimism in tax reducing bill that would lower corporate and individual tax rates boosting profits.

Monday’s market moving events

• Italian trade balance is expected to reach a surplus of 4 billion EUR in October.
• The bank of England bulletin will be published summarizing economic and financial markets development in the UK.
• The Eurozone final CPI inflation for November is seen rising 1.5% y/y while core inflation is expected to rise 1.0% y/y.
• German Bundesbank releases its monthly bulletin.
• The Confederation of British Industries (CBI) publishes the index of industrial orders.
• Canada’s foreign securities purchases are published.
• The US NAHB housing market index is set to remain unchanged at 70 in December.

Major forex market movers

• The US Dollar was boosted on Friday against both EUR and GBP.
• Sterling lost as much as 0.8% against the US Dollar after the Brexit negotiations moved into the second phase of dealing with trade with the tough legislative conditionality of the deal from the EU side.
• The US Dollar is set to consolidate further in a pre-Christmas with a possible boost from the US tax legislation.

Friday’s macro summary

• Tankan business survey from the Bank of Japan rose to the cyclical highest since April 2009 with diffusion index for large enterprises standing at 25 in December.
• The Eurozone trade balance reached a surplus of 18.9 billion EUR in October.
• The Bank of Russia cut the key rate by 50 basis points to 7.75%. Governor Nabiullina said 50 bps rate cut fits Central Bank’s  gradual monetary easing policy. Nabiullina said she sees room for more rate cuts in 25 or 50 basis points gradient.
• The Bank of England bulletin examined the global role of the US Dollar.
• The Bank of England chief economist Andy Haldane is set to speak at the International Rome Conference on Money, Banking, and Finance, in Palermo at 13:15 GMT.
• The Empire State manufacturing index decelerated to 18.0 in December but remained solid at highs.
• Canadian manufacturing sales fell 0.4% m/m to C$53.5 billion in October.
• The US industrial production rose 0.2% m/m in November after 0.9% in October.
• The European summit formally agreed upon moving the Brexit negotiations to the second phase of debating trade but concluded that the UK is expected to follow the EU rules during the transition phase of Brexit including the ultimate rule of the European Court of Justice, a rule likely to face dissent in the UK.