The euro will pass next to the German CPI and the US dollar could appreciate at the last minute of the FOMC

POINTS OF DISCUSSION – EURO, GERMAN CPI, AMERICAN DOLLAR, FOMC MINUTES, EDF

• A radical change in the Fed's rate hike expectations would likely be an overreaction
• FOMC minutes could boost tightening of bets and boost the US dollar
• The euro should ignore a slight drop in the German CPI

German CPI the data represent the economic calendar in European trading hours. The overall inflation rate is expected to fall by 2.4% in November in November, down from a record high of 2.5% in the previous month.

The result can mean little for the euro in one way or another given its limited implications for the ECB's short-term monetary policy. The plant seems to be on the autopilot because it reduces the QE until the end of the year. A further rate hike is not expected until October at least.

AMERICAN DOLLAR MAY INCREASE IN FOMC MEETING MINUTES

This seems likely to put Minutes of November FOMC meeting squarely in the honor. The policy statement issued following this meeting of the rate setting committee gave an optimistic tone. A similar story in today's publication may encourage rethinking of the latest gradual change in market expectations.

Fed Chairman Jerome Powell said the benchmark federal funds rate was now "just below" the neutral range, where the policy is neither stimulating nor restrictive. The markets interpreted this as meaning that the current tightening cycle was coming to an end, drastically reducing bets on the rate hike announced at 2019 and dropping US Dollars.

This seems to be an overreaction. The Fed's estimates – last revised at the end of September – put the neutral rate in a range of 2.5 to 3.5%, with most of the decision-makers' bets being grouped halfway through this period. 3% range. This represents approximately 75 to 100 basis points of the current federal funds rate range of 2-2.25%.

The Fed has also projected increases of 75 to 100 basis points by the end of next year. In other words, Mr. Powell's remarks seem to subscribe to the political strategy of the status quo unveiled two months earlier. If the report says so much, the bank note will probably organize a large-scale recovery.

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** Every time listed in GMT. To see the complete economic calendar here.

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— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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