Here is what you need to know on Friday, December 17:
The US Dollar Index (DXY) closed in the negative territory on Thursday as the British pound and the euro gathered strength on the back of the Bank of England's (BOE) and the European Central Bank (ECB) hawkish policy outlook. Ahead of the weekend, the greenback is consolidating its losses and investors await IFO sentiment data from Germany and the final revision to the euro area Consumer Price Index readings.
As expected, the ECB announced that it will end the Pandemic Emergency Purchase Programme (PEPP) in March. To continue to support the economy, the bank will increase the purchases under the Asset Purchase Programme to €40 billion from €20 billion in the second quarter before bringing them back down to €30 billion and €20 billion in the third and fourth quarters, respectively. The bank revised its inflation forecast for 2022 significantly higher as well. During the press conference, ECB President Lagarde said a rate hike in 2022 was very unlikely but didn't outright dismiss the possibility.
Following November's decision to keep its policy rate unchanged, the BOE opted for a 15 basis points rate hike in December, citing inflation concerns. The bank noted that the Omicron variant is expected to weigh on the economic activity in the near term while adding that the potential medium-term impact was unclear.
EUR/USD reached its highest level in more than two weeks at 1.1361 on Thursday but erased a portion of its daily losses before closing at 1.330. The pair is moving sideways near that level early Friday.
GBP/USD is virtually unchanged on the day a little above 1.3300. The data from the UK showed that Retail Sales rose by 4.7% on a yearly basis in November, after posting a 1.5% contraction in October, but investors showed no reaction to this reading.
USD/JPY reversed its direction after reaching a multi-week high of 114.28 earlier in the week and seems to have streaming around mid-113.00s. The Bank of Japan left its monetary policy settings unchanged after the December meeting and Governor Haruhiko Kuroda reiterated that they will ease the policy without hesitation if needed.
USD/TRY rose nearly 6% on Thursday after the Central Bank of the Republic of Turkey decided to cut its policy rate by 100 basis points. The pair reached a new all-time high above 16 early Friday and is up nearly 20% in December.
Gold gathered strength as central banks made it clear that they are increasingly concerned about inflation. XAU/USD is trading above $1,800 for the first time in December.
Bitcoin stays below the descending trend line coming from early November and trades around $47,000. Ethereum failed to hold above $4,000 after staging a decisive rebound on Wednesday and was last seen losing nearly 2% on the day at $3,890.
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