Global Themes

Back from the Christmas break, the U.S. dollar was mixed on light, holiday-subdued trade. Markets remained on holiday Monday in Australia, Britain and Canada. The dollar didn’t stray far versus its biggest peers from the euro zone, Japan and Britain. However, a 3 percent spill in the price of oil to below $37 weighed on commodity-backed units like the Canadian and Australian dollars. The dollar this week is on track to close out the fourth quarter and 2015 on a winning note. The dollar overall though hasn’t been able to stick the landing, on track for a general decline in December when monetary policies between the U.S. and Europe didn’t diverge as much as expected. The dollar will tote its bullish bias into 2016. Still, the outlook for the U.S. currency remains fraught with uncertainty.

EUR

The euro firmed to mid-December highs against the U.S. dollar in holiday-subdued trade with hubs in Australia, Britain and Canada enjoying an extended break on Monday. The last week of the year features little economic data from both shores, suggesting major currencies would adhere to their confined ranges until markets return to full strength after the start of the New Year. Will a bearish reality soon set in for the single currency when 2016 gets under way? The bloc’s weak fundamentals should make it difficult for the euro to enjoy lasting gains.

GBP

Britain’s pound treaded water above recent eight-month lows with uncertainty in all things U.K. liable to shadow it into the New Year. The pound has been harassed of late by uncertainty over Britain’s future in the European Union. Meanwhile, mounting signs of a U.K. economy turned sluggish keep a local rate rise on a distant horizon, a negative for sterling versus the dollar whose central bank has embarked on a higher rate path.

CAD

Oil appeared to get a lump of coal in its stocking from Santa as the coming and going of the Christmas break saw the liquid commodity resume its descent, weighing on a broad class of resource-linked currencies such as Canada’s.

USD

A light week for the U.S. economy and general participation for global markets suggests the dollar would adhere to its well-worn ranges of late. U.S. consumer confidence is forecast to brighten when the data comes due Tuesday. The Chicago PMI on Thursday, a gauge of Midwest factory growth, is forecast to barely climb above 50, though out of contraction terrain. The dollar will carry a favorable bias into 2016, though to maintain it the Fed would need to make good on its conditional pledge to take U.S. borrowing rates higher next year.