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Diverging monetary policies may extend the USD rally

Today’s US CPI data produced a relatively limited reaction in the US dollar, which is set to end the week a bit weaker against most major currencies. Attention now turns to the 17(!) central bank meetings next week, including the Fed, ECB, BoE, and BoJ. With next week’s economic data releases generally lower profile ones, we think the divergence in the outlook policy rates among the Fed and other major central banks will set the tone for FX markets going into the new year.

 

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