US Nonfarm Payrolls to set the pace of the normalization cycle

The USD will likely find support in Friday's NFP report. Average job creation of 150k or more during the next few employment reports should be consistent with a gradual increase in the fed funds rate. Therefore, taking into account the expectations of a creation of 225k jobs in December (consensus: 200k), the USD is expected outperform and the Fed will be comfortable delivering another 25bp hike in H1, followed by an additional 50bp of hikes in H2 this year. Currently, fed funds price in only about 10bp for March and 50-60bp over the next year.

In addition to labour market data, ISM manufacturing and services will be published next Monday and Wednesday. The consensus expects a slight improvement in manufacturing to 49.0 from 48.6 and services to 56 from 55.9, confirming the firm footing of domestic demand, despite global economic headwinds. November factory orders (Wednesday) are expected to drop 0.2% m/m after a strong increase in November. Finally, the minutes of the December 16 meeting will be released the same day. 

"We do not think that there will be much more new information from that received in the press conference; therefore, the market effect should be limited", says Barclays.