Just like November, forex trading in December will be calm, with no major shocks or surprises. The main event in December will be the fed reserve meeting.

FOMC Meeting: Interest rates likely to be hiked in December

This event is scheduled to take place on the 13th day of December. Analysts expect that the Fed would increase interest rate during this meeting by 25 basis points. If they decide to do that, then the short Fed funds rate would increase to something between 1.25% – 1.50%. This meeting is also expected to be the last one to be chaired by outgoing Fed Chair Janet Yellen as her tenure expires in February next year.

During this meeting, the Fed will release the U.S economic forecast, with a press conference by Janet Yellen coming up after that. Investors are interested in seeing how interest rates hike would be like in 2018 and this meeting will be an indicator for them.

The next Fed chair Jerome Powell is seen by analysts and traders as someone who will continue with the current policies of the institution. Due to this, it is expected that market shocks will be mitigated.

Another issue to be tackled at this meeting is that of weak inflation phase. The wage growth across the country has been stable so far this year. However, before the policymakers could move on with their proposed three rate hikes, they need to have further evidence that points towards wage pressures building up.

No changes expected from other central bank meetings

In addition to the Fed meeting, there are other monetary policy meetings that are slated to happen in December. Bank of Canada, the Swiss National Bank, and the European Central Bank are all expected to hold a meeting this month. They are however expected to keep things the way they are.

The main focus though will be on the ECB meeting that will take place a day after the Fed meeting. During their last meeting, the European central bank has stated that QE will be in place until September 2018, though a reduced rate of 30 billion euro per month. This meeting though isn’t expected to bring any major decision.

The EURO to be affected by German economy.

The euro is the currency to watch out for this December. A potential bullish driver for this currency will be the German economy that has begun to show signs of inflation. If that happens, then the euro would continue to go higher. Any pullback at that point would see the currency find support close to the 1.17 level, something that has been very important before.

GBP/USD to move higher as Brexit deal draws closer.

More positive reports on the Brexit negotiation are expected in December. This could relive the pounds that have been under pressure for most of November after it was reported that the UK might walk out of the talks.

The pair is expected to continue with their bullish run that began late November as more details of the Brexit deal are revealed. GBP/USD will likely hit 1.38 in December and might go beyond that if things work out as expected.