Here’s what you need to know on Thursday, December 12:
The European Central Bank (ECB) and the Swiss National Bank (SNB) will announce monetary policy decisions after the last policy meeting of the year on Thursday. In the second half of the day, market participants will closely monitor weekly initial jobless claims data and the US November Producer Price Index (PPI).
The US Bureau of Labor Statistics (BLS) reported on Wednesday that annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), rose to 2.7% in November from 2.6% in October, as anticipated. On a monthly basis, the CPI and core CPI rose 0.3% to match analyst estimates. The Dollar Index (USD) continued to rise after the November inflation report and closed the fourth consecutive day in positive territory. As of early Thursday, the USD Index is holding steady around 106.50.
US Dollar PRICE This Week
The table below shows the percentage change of the US Dollar (USD) against major currencies this week. US dollar was the strongest currency against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.44% | -0.27% | 1.65% | -0.12% | -0.55% | 0.48% | 0.49% | |
| EUR | -0.44% | -0.70% | 1.33% | -0.47% | -0.89% | 0.13% | 0.10% | |
| GBP | 0.27% | 0.70% | 1.87% | 0.23% | -0.20% | 0.83% | 0.81% | |
| JPY | -1.65% | -1.33% | -1.87% | -1.77% | -2.08% | -1.27% | -1.09% | |
| CAD | 0.12% | 0.47% | -0.23% | 1.77% | -0.38% | 0.60% | 0.58% | |
| AUD | 0.55% | 0.89% | 0.20% | 2.08% | 0.38% | 1.03% | 1.01% | |
| NZD | -0.48% | -0.13% | -0.83% | 1.27% | -0.60% | -1.03% | -0.04% | |
| CHF | -0.49% | -0.10% | -0.81% | 1.09% | -0.58% | -1.01% | 0.04% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will represent USD (base)/JPY (quote).
During Asian trading hours, data from Australia showed the unemployment rate fell to 3.9% in November from 4.1%. This reading was better than the market expectation of 4.2%. In this period, employment change increased by 35,600, compared to the market forecast of 25,000. AUD/USD gained bullish momentum on upbeat labor market data and was last seen gaining over 0.8% on the day above 0.6400.
The Bank of Canada (BoC) announced on Wednesday that it reduced the policy rate by 50 basis points to 3.25%, as expected. In its policy statement, however, the BoC took a cautious tone regarding further policy easing. The BoC removed language about the reasonableness of expecting further rate cuts if the economy developed in line with forecasts. Instead, it said it will evaluate the need for further rate cuts on a decision-by-decision basis. USD/CAD fell after the BoC decision and posted small daily losses on Wednesday. Early on Thursday, the pair remains on the defensive and is trading below 1.4150.
USD/CHF closed marginally higher on Wednesday but lost traction in the European morning on Thursday. At press time, the pair is down 0.2% on the day at 0.8825. The SNB is expected to cut the official interest rate by 25 basis points to 0.75%.
EUR/USD continued to decline and posted losses for the fourth consecutive day of trading on Wednesday. The pair recovers early on Thursday and is trading comfortably above 1.0500. The ECB is expected to cut key rates by 25 basis points. Following the decision, ECB President Christine Lagarde will deliver the policy statement and answer questions at a press conference starting at 13:45 GMT.
GBP/USD It posted small losses on Wednesday but managed to find a foothold early on Thursday. The pair was last seen rising towards 1.2800.
USD/JPY fluctuates in a tight range above 152.00 after closing in positive territory on Wednesday.
Gold extended its weekly rally and gained about 1% on Wednesday. XAU/USD remains in a consolidation phase near $2,720 in the European morning on Thursday.
Central banks FAQs
Central banks have a key mandate to ensure price stability in a country or region. Economies constantly face inflation or deflation when the prices of certain goods and services fluctuate. A constant rise in the prices of the same goods means inflation, a constant fall in the prices of the same goods means deflation. It is the central bank’s job to keep demand in line by adjusting its interest rate. For the largest central banks, such as the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has an important tool to raise or lower inflation: modify its reference interest rate. At pre-communicated times, the central bank will issue a statement with its reference interest rate and give additional reasons why it maintains or modifies it (cuts or raises it). Local banks will adjust their savings and loan rates accordingly, which in turn will make it harder or easier for citizens to make a profit on their savings or for companies to borrow and invest in their businesses. When the central bank substantially raises interest rates, we speak of monetary tightening. When you reduce your reference rate, it is called monetary easing.
A central bank is usually politically independent. Members of the central bank’s policy council go through a series of panels and hearings before being appointed to a position on the policy council. Each member of that council usually has a certain conviction about how the central bank should control inflation and the subsequent monetary policy. Members who want a very loose monetary policy, with low rates and cheap loans, to substantially boost the economy, while settling for inflation slightly above 2%, are called “doves.” Members who prefer higher rates to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is at 2% or just below.
Typically, there is a chair who leads each meeting, has to create a consensus among the hawks or doves, and has the final say when votes need to be divided to avoid a 50-50 tie on whether to adjust current policy. The president will give speeches, which can often be followed live, communicating the current monetary stance and outlook. A central bank will try to push its monetary policy forward without causing wild swings in rates, stocks, or its currency. All central bank members will channel their stance toward markets ahead of a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, members are prohibited from speaking publicly. This is what is called the silent period.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
