The previous week's general trend is the tightening of the Fed's position, which signaled its intention to consider the issue of the first rate hike in March, and not in June, as was assumed quite recently. Accordingly, the markets reacted – the S&P500 index has fallen a little more than 3% since the beginning of the year, while the yield of Treasury bonds continues to grow.

The bullish momentum slightly ceased on Friday as several data on industrial production, export and import prices, and retail sales turned out to be worse than expected on all fronts. Such negative data slightly weakened the bullish impulse of the US dollar, while the stock market immediately rose.

The overall position on the US dollar has changed a little bit. The lack of direction is observed for the sixth week in a row, and the growth of 334 million to 20.034 billion is too insignificant to count on the formation of a stable trend.

It is assumed that the US currency will be under pressure on Monday since the probability of a slowdown in the inflationary momentum should be assessed by the Fed members. This will slightly calm the bulls and increase the demand for risk.

EUR/USD

There were no important macroeconomic reports from the EU last week. The focus was on the ECB's comments on the current situation, but they did not clarify much either. On Thursday, ECB Vice President Guindos hinted that inflation could be more stable than previously thought, but during the next day, C. Lagarde reiterated her position that high energy prices are at the heart of inflation, and when these prices decline, then inflation will automatically return to the target.

The difference in approaches between the Fed and the ECB continues. The Fed is increasingly hinting at the first rate hike in March, while the ECB generally refuses to consider an increase in the near future. The euro exchange rate will focus on this difference, so any growth is considered as a correction.

A small short position on the euro turned into a small long one during the reporting week (+853 million). Speculative positioning confirms the upward trend, which has already led to a breakdown of the resistance level of 1.14. There are good reasons to believe that the growth will continue, as the settlement price is still directed up.

The euro rose above the upper border of the bearish channel, but there were no fundamental reasons for an upward trend reversal. We continue to consider the growth as corrective. The momentum is not yet over, so an attempt to go even higher can be expected. The nearest resistances are 1.1520 and 1.1630.

GBP/USD

Today, NIESR will present an estimate of GDP growth in December. A report on the labor market will be published on Tuesday, and the UK's inflation report for December will be known on Wednesday, which is a key day for the pound. The overall consumer price index is expected to remain at a level of just over 5% y/y. The core index is about 4%, but it can also be noted that inflation turned out to be higher than expected in five cases over the past seven months. If the forecasts are confirmed, this will have a bullish effect on quotes.

In general, the pound's growth was supported by an increase in demand for risk, as well as an unexpected factor – increased pressure on Prime Minister Johnson to resign. Johnson, a supporter of strict quarantine measures, turned out to be not a big fan of observing these measures. His possible resignation is expected to serve as a trigger for lifting restrictions, which may have a positive impact on the growth of consumer demand.

The net short position on the pound fell by 827 million to -2.485 billion. The bears still have the advantage, but there have been steady attempts during the past two weeks to reduce the short position, which is supported by an increase in risk demand.

As assumed earlier, the pound successfully tested the bearish channel border and went higher, approaching the target of 1.3820/30. From a technical point of view, a consolidation above this level may mean a trend reversal, but the fundamental picture is still unstable.