Dollar Consolidation Coming to an End, Poised for New Leg Up

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The US dollar has been consolidating for the past couple of weeks, and that phase appears to be coming to an end. Next week’s economic data and events will likely underscore the divergent theme, which works in the dollar’s favor.

We do not expect the ECB to announce a sovereign bond purchase program at next week’s meeting, the last of the year. Recall that with Lithuania joins EMU on January 1, the ECB reduces its policy making meetings from once a month to once every six weeks, like the Federal Reserve. It also introduces a rotating voting scheme, which means that all member central banks, including the Bundesbank, will not vote at every meeting.

Many important ECB decisions have taken place over the objections of the Bundesbank, like the initial bond buying program SMP and OMT (which the Bundesbank has argued against before the European Court of Justice), and the…

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