USD: Blockbuster jobs numbers supported USD and we expect this trend to continue ahead of the Fed meeting as interest rate expectations continue to adjust. Today’s focus will be on Fed’s Lockhhart speech and Labor Markets Conditions Index. Lockhart has been dovish, so a shift would be read as indication that center of gravity in Fed thinking is shifting.
EUR: Lighter data schedule ahead of TLTRO auction on Thursday. Should be sensitive to ongoing USD appreciation, but if re-pricing on Fed spills into higher volatility and risk reduction, unwinding of short EUR/EM positions could be small support. Italian downgrade not yet material mechanically, but should refocus investors on political risk into 2015 with polls also showing resurgent Syriza support.
GBP: No major data or events, should trade in line with USD trend. Weale/McCafferty speeches and Industrial production highlights later in the week.