FOREX UPDATE - USD

The US dollar is little changed in tight ranges overnight, with EURUSD so far holding above yesterday's 1.3161 lows.

As noted yesterday, the macro arguments for sustained USD weakness into year-end have gone into remission, with markets no longer pricing much risk of a near-term Fed easing and carry trades performing well in the wake of this week's BoJ meeting.

On the other hand, price action continues to suggest there is good interest to sell the USD into rallies from slower moving market participants who missed the big Thanksgiving week dollar collapse.

In the New Year, we expect data to bolster market concerns on the health of the US economy, and a rebuilding of Fed easing hopes should keep EURUSD pointed towards upwards

Ahead today, weekly initial jobless claims and the final report on Q3 GDP are released at 8:30 am EST, followed by the Philly Fed survey at noon. We expect claims to have rebounded sharply to 325k after last week's surprise drop to 304k, which our economists attribute to seasonal influences. For the Philadelphia number, we agree with consensus that the index will be little changed after November's big recovery.

Overall, the data is unlikely to encourage markets to rebuild Fed easing expectations significantly-we will likely need to wait for the key December releases in early January for a chance to get markets moving in the direction of our Fed forecast again.

Also of note, Fed President Lacker speaks at 1 pm on the economic outlook. He has been the loan dissenter in favour of rate hikes of late, so hawkish comments seem likely. He will no longer be a voter next year.