Another day in an unusual week. During the Asian session, Japanese data is due, including Industrial Production and Retail Trade. The key report of the day will be the weekly US Jobless Claims.
Here is what you need to know on Thursday, December 28:
The US Dollar Index (DXY) extended its slide and dropped below 101.00, reaching its lowest level since July. The 10-year Treasury yield fell to 3.78%, a five-month low, while the 2-year settled at 4.24%, the lowest since May.
US stocks held near recent highs, with the Dow Jones on its way to another all-time high. The combination of risk appetite and lower Treasury yields continued to weigh on the US Dollar.
Data released on Wednesday showed the Richmond Fed Manufacturing Index dropping to -11 in December, worse than the market consensus of -7. Shipments fell from -8 to -17, new orders decreased from -5 to -14, and employment edged down from 0 to -1. On Thursday, the weekly Jobless Claims report is due, along with trade figures and the November Pending Home Sales report.
EUR/USD reached levels above 1.1100 for the first time in five months, boosted by broad-based Dollar weakness. EUR/GBP hit monthly highs slightly below 0.8700 but then pulled back.
GBP/USD peaked at 1.2802, the strongest level since August, and then retreated modestly. The trend is up, but the Pound needs to consolidate above 1.2800 to open the doors to more gains.
The Japanese Yen outperformed during the American session, boosted by the decline in Treasury yields. USD/JPY fell below 142.00, approaching December lows. Japanese data due on Thursday includes Industrial Production and Retail Sales figures for November.
AUD/USD remains in an upward channel, facing resistance around 0.6850. NZD/USD continued to rise and reached the 0.6350 area. Both currency pairs are supported by risk appetite and lower yields.
The loonie lagged on Wednesday. USD/CAD bottomed at 1.3175, the lowest since August, but then climbed back above 1.3200 to end the day with modest gains.
Gold was headed toward a record close above $2,070, rising for the fourth consecutive trading day. The bias remains to the upside. Silver failed to follow Gold and closed flat around $24.25.
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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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