Forex Weekly Outlook: Will the US Dollar rebound?

The British pound is enjoying some positive momentum from the fresh Brexit deal, as the currency has climbed to its highest level since May 2018.

In the US, the Chicago PMI rose to 59.5 in December, up from 58.2 and beating the forecast of 56.6 points. Pending Home Sales declined for a third straight month, with a reading of -2.6%. The week ended on a positive note, as unemployment claims dropped for a second straight week, falling to 787 thousand.

1. Eurozone Manufacturing PMIs: Monday, 8:15 in France, 8:30 in Germany, and 9:00 for the whole eurozone. The German and eurozone manufacturing sectors remain well into expansionary territory, and the upcoming PMIs are expected to confirm the initial estimates of 58.6 and 55.5, respectively. The PMIs for Spain, Italy and France are also above the 50-line, which points to expansion.
2. UK Manufacturing PMI: Monday, 9:30. The manufacturing sector continues to show strong expansion, with readings well above the neutral-50 level. The second-estimate is expected to confirm the initial estimate of 57.3 points.
3. German Prelim CPI: Wednesday, All Day. Inflation in the largest economy in the bloc slumped to -0.8% in November, its lowest level in12 months. The index is expected to bounce back in December, with an estimate of 0.6%.
4. FOMC Meeting Minutes: Wednesday, 19:00. The FOMC will release details of the final policy meeting of 2020. With the Fed in a very accommodative mood, the markets are expecting a dovish tone to the minutes.
5. Eurozone Inflation Report: Thursday, 10:00. Headline CPI continues to flounder and has posted five straight declines. No relief is forecast for December, with an estimate of -0.2%. Core CPI is expected to remain at 0.2% for a third successive month.
6. ECB Monetary Policy Meeting Accounts: Thursday, 12:30. The ECB will release the minutes of its November policy meeting. With inflation at very low levels, investors will be looking for any hints as to whether the ECB plans additional easing early next year.
7. Canada Employment Report: Friday, 13:30.  Employment Change slowed to 62.1 thousand in November, but easily surpassed the forecast of 22.0 thousand. In November, the unemployment rate fell for a sixth straight month, dropping from 8.9% to 8.5%. The December data could affect the movement of USD/CAD.
8. US Employment Report: Friday, 13:30. Nonfarm payrolls are expected to fall to just 69 thousand in December, down from 245 thousand beforehand. A reading below expectations could send the US dollar lower.