The dollar frankly looks weak in the starting days of 2018 but it's too early to talk about changing direction. The environment is quite saturated with macroeconomic publications and because of this, it's hard to stir up complacent markets after the holidays.

At 15.00 London time, ISM indexes on business activity in the manufacturing sector will be published. Forecasts are neutral with a low probability of decline. On the eve of Markit presenting its own report, the December index was at 55.1p which was slightly higher than 55.0p a month earlier. The index is still in the region of annual highs but the upward dynamics is clearly slowing down.

In the evening, the minutes of the December 13 Fed meeting will be published. The dollar reacted with a decline to the meeting, not finding reasons for optimism as the change in macroeconomic forecasts turned out to be insignificant. The reasons for 4 rate increases were not found and inside the cabinet there is no unity as Kashkari and Evans voted against the rate hike in December.

The markets concluded that the Fed, like everyone else, intends to wait for the first results of the tax reform that has been carried out by Trump's office. Its future impact on the economy is unclear. On one hand, business activity is expected to increase along with capital repatriation and the demand for the dollar, especially against the background of the Fed's balance reduction. On the other hand, the danger of a rapid growth in the budget deficit is multiplied, which will increase the level of risk and increase the political confrontation in the Congress.

Can the publication of the protocol intensify the negative? Only if it turns out that except for Evans and Kashkari, other members of the Cabinet expressed doubts. If the protocol does not contain anything new, the dollar may well react with growth.

On Thursday, there will be a warm-up before the publication of the report on the labor market with the release of a report on employment in the private sector from ADP and the index of job cuts from Challenger. Forecasts for non-pharmaceuticals in December are neutral with expert estimates fluctuating near the level of 190 thousand new jobs, which is quite a lot, given the record low unemployment. At the same time, the forecast for the average duration of the working week and hourly wage is left at the level of November, as well as on the level of unemployment, which should have been beneficial to the bulls on the dollar.

Low pay is the main deterrent to inflation. In the US, wage growth is observed in 2015/16 but in the past six months, there has been a further decline. In the euro area there has been some improvement in relation to the absolute minimum of 2016 but in any case, the current levels are noticeably below pre-crisis levels.

Low wage growth rates mean low inflation and in this regard, the situation for the dollar is still somewhat better despite the slowdown in the lag behind the euro. Perhaps this reduction is one of the reasons for the confidence of the euro in recent weeks.

There are other possible reasons for the slowing growth of the labor market. Markit notes that in the service sector, the pace of new jobs has fallen to a 7-month low. This data is usually somewhat ahead of the official data of the Ministry of Labor and therefore, the probability of seeing the figures slightly worse than the forecast on Friday is still quite high.

One of the declared goals of the tax reform is the growth of employment and the growth of incomes of the population. Of course, Friday will not give any new data on this but the market's expectations boil down to the fact that the reform will give a new impetus to the growth of the labor market. So, even a slight excess of the indicators above the forecasts can add a fair amount of optimism to the bulls in the dollar and finally complete the three-week decline.

The euro has not yet been able to update the September maximum. Yet, the reasons that pushed the euro up are not so large as to be sure of continuing the growth. Rather, all the main factors after December 13 have already been identified and largely recouped. The dollar, by the end of the week, will be able to return the initiative and start a new wave of strengthening.