“The US calendar includes personal income, PCE and durable goods orders for November (on 23 December) as well as Dallas and Richmond Fed manufacturing indices on 27-28 December. For the time being, there are no scheduled Fed speakers until the Fed minutes release on 4 January. We doubt data will be able to shake markets in the low-volatility environment of the festive period.”
“In China, an increasing number of unofficial reports suggest that the actual death toll may be considerably larger than the reported one: should this be backed by more evidence, markets may increasingly doubt the sustainability of China’s zero-Covid exit path, with negative implications for the Yuan, Asian EMFX, and high-beta currencies.”
“On the energy side, Russia’s potential retaliation to the EU cap on gas prices, a possible re-escalation in the conflict in Ukraine and weather-related news may all have repercussions on the FX market. European currencies continue to look quite vulnerable from this point of view.”
“We think DXY could close the year around the current levels. It’s worth remembering that the Dollar rose in each of the past four years in January. Our view for early 2023 is still one of USD recovery.”