UK and European investors are twiddling their thumbs today, and what little risk appetite there is has ebbed away this afternoon, says Chris Beauchamp, chief market analyst at online trading platform IG.
European markets drift sideways
“Earlier gains for European indices have been chipped away this afternoon, as concerns about interest rates and the ongoing Ukraine conflict sapped risk appetite. The past month has seen a dramatic repricing of expectations around interest rates. Previously, markets had seen cautiously optimistic that the end of the surge to tighten rates was upon us. Stronger data from various quarters has reversed that view entirely.”
Biden’s visit to Kyiv highlights ongoing conflict
“As if this renewed hawkish view wasn’t enough, President Biden’s unexpected visit to Kyiv reminds us that the standoff between Russia and the West over Ukraine is likely to be a semi-permanent feature. And any hope of some positive news in the talks between the UK and Europe over changes to the Protocol have been dashed, as a brewing Tory rebellion threatens to undermine Sunak’s leadership."
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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