A Volatile December Expected For Forex Traders

November closes and December opens as traders expected one of most exciting and volatile trading months this year. The next 30 days is packed full of excitement, hopes and tensions.  The first few days of the month sees 2 public appearances by Federal Reserve Chief Janet Yellen along with speeches by 6 Federal Reserve members. This also could make for an interesting trading week as the greenback holds steady above the 100 price level. The US dollar rallied on Monday morning gaining 11 points to 100.16. As usual traders focus the first week of each new month is the US nonfarm payroll report which will be keenly watched this week and could find traders exhausted by the time of the release.  he US dollar has been on a tear. High expectations for a Fed rate hike, the turmoil in China and the still continuing stimulus in Europe and Japan are adding muscle to the dollar. Last week, the US dollar index crossed the 100 mark and hit an eight-month high of 100.20.

Soft inflation readings out of the euro zone on Monday and Tuesday could strengthen expectations for ECB action at its Dec. 3 policy review, but whatever the outcome, an easing appeared to be fully factored in. The ECB is likely to announce more monetary stimulus at their policy meeting on Thursday, which should see EUR/USD end the week lower and generate a drag on AUD/USD. The euro is currently trading at 1.0589 down a few points in the Asian session and is expected to continue to decline for the day.

In contrast, the Federal Reserve is widely tipped to hike U.S. interest rates at its mid-December policy meeting, though Fed Chair Janet Yellen could use a speech on Wednesday to steer markets either way.

The Bank of Australia and Canada will meet this week, and no changes are expected but comments on the economic outlook will be crucial. Tuesday morning traders will get their first big data release of December with Chinese manufacturing PMI due. The Australian dollar remains below the 0.72 level trading flat in the morning session at 0.7190 while the kiwi added 15 points to reach 0.6548. The Australian dollar has fallen below 0.72 as last week’s weak business investment figures and falling commodity prices weigh on the currency. The RBA is widely expected to keep the cash rate unchanged after governor Glenn Stevens last week gave a very clear signal that he was prepared to wait for the first meeting in 2016 before considering another interest rate cut.

Wednesday ADP will release their private payroll data, a leading indicator for Friday’s official jobs data. All of this will probably overlooked with the big event this week the ECB meeting, rate decision and press conference scheduled for Thursday afternoon.

Against the yen, the dollar was steady at 122.75, still in consolidation mode after reaching a three-month peak of 123.77 on Nov. 18. It was on track to rise 1.7 percent in November, and is up 2.5 percent so far in 2015. Bank of Japan Governor Haruhiko Kuroda told business leaders on Monday the central bank won’t hesitate to further ease monetary policy to achieve its two percent inflation goal quickly, and that stable yen moves were desirable.

Japanese economic data released early on Monday were upbeat, in contrast with weak price and spending data released last week. Japan’s industrial output rose for a second straight month in October and retail sales grew much faster than expected.