The USD rallies, oil prices firm, equity markets are up, and US yields gain on signs of softening inflation. The USD rebounds from 3-month lows, oil prices firm as OPEC ministers meet, and equity markets strengthen on easing inflation and signs of a soft landing for the US. Global bond measures head for their biggest monthly rally since 2008. Euro eased after eurozone inflation sank to 2.4%, increasing speculation for an earlier start to the ECB interest-rate cuts in 2024. US data on Wednesday provided support for a soft landing for the US economy as economic activity slowed in recent weeks as consumers pulled back on non-essential spending. The Fed highlighted in the release of its Beige Book yesterday that GDP rose at its fastest pace since 2021, while consumer spending advanced at a less robust rate. China's Manufacturing PMI dropped below 50, which is a bearish sign for the Chinese economy. In focus today are the US Core Personal Consumption Expenditures Price Index, US Jobless Claims, Personal Income and Personal Spending, CAD GDP, and Fed's Williams Speech.
In other news. Israel and Hamas extend Gaza truce by one day in a last-minute deal. China's factories fell deeper into contraction, and more policy support is expected. China Evergrande seeks to avoid liquidation with a last-ditch debt plan. Henry Kissinger died at 100. French inflation fell more than expected to 3.8%. US accuses Indian official in foiled plot to kill Sikh separatist in NYC. COP28 president denies using UN climate summit to pitch oil deals. Russia has stockpiled missiles for a winter attack on Ukraine, says NATO. Argentina's Javier Milei names moderate ex-trader as economy minister.
in currency markets. The USD rallies from 3-month lows as the Euro comes under selling pressure as EU inflation drops more than expected. China's CNY, AUD & NZD remain on track for their strongest month in 2023 vs USD. CNY slips 0.1%, while Asian currencies fall 0.2% on average vs USD. Trading currencies come under pressure with MXN & SEK tumbling 1%, NOK & ZAR weakened 0.55%, JPY, NZD & AUD down 0.2%, and CHF slipped 0.1% vs USD.
In commodity markets. Oil prices firmed by 1.1%, Natural Gas strengthened by 0.8%, Gold prices fell by 0.4%, while Copper and silver prices are flat, Wheat prices edged higher by 0.3% and Soybean prices dipped by 0.2%.
CAD slips in early trading versus the USD, but outperforms its peers as stronger oil prices provided support to the loonie. Domestically Canada's currency account deficit narrowed in Q3, disappointing investors, and the focus shifted to today's key CAD GDP. The gross domestic product is considered the main measure of Canada's economic activity and is expected to turn positive to 0.2% in Q3 vs Q2 which was -0.2%. Today the focus will be on US data releases, the OPEC meeting, and CAD GDP to provide direction intraday.
EURCAD dropped in early trading after the Eurozone inflation printed lower than expected, and CAD found additional support from strengthening oil prices.
EUR has tumbled by almost 100 bps from Wednesday's close after softer-than-expected EU inflation data. Eurozone preliminary HICP inflation dropped to 2.4% y/y in November vs 2.9% in October. Across Europe, France saw its inflation levels fall to 3.8% vs 4.5% previously, German Retail Sales beat expectations coming in at 0.1% v -4.3% previously, and Italian inflation data came in at 0.8% vs 1.7% in October. The Euro came under selling pressure after investors anticipated the ECB would take a more dovish tone on domestic interest rates, with more economists calling for the ECB to ease sooner into 2024. Intraday focus shifts to the US PCE to help provide direction to currency markets today.
GBPEUR holds flat intraday and looks like the pound will close at November highs, up nearly 1% for the month.
GBP drops towards 1.2650 amid a strengthening USD, with markets focusing on US PCE next. The pound tracked alongside its peers weakening against the USD amid US data supporting a soft landing and investors cautious heading to Friday's US Fed Chair's speech on Friday. The USD found support on Wednesday as investors took some profits off the table after the pound rallied over 4% in November. The focus will be on a flurry of US data releases and BoE's Green's speech to help provide intraday direction to the pound.
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