Weekly Forex Report

In the US, upward revisions for the third quarter growth and inflation slightly added to the recent improving economic outlook. Indeed, growth was strong, but most of the increase was due to temporary factors. Meanwhile, the increase in inflation, though still weak on a year over year basis, could signal some stabilisation. However, the key release was nonfarm payrolls on the 6 December, which confirmed an improving labour market. With an increase of 203K in payrolls and a drop to a five year low of 7%, the odds of seeing tapering in December are increasing. However, the threat of a new political gridlock remains a hurdle. As a result, the market is now likely to focus on the 13 December deadline. Meanwhile, the US dollar should be supported as economic data suggest that the start of the reduction of the Fed’s liquidity injections are drawing near.