What you need to take care of on Thursday, December 8:
The US Dollar finishes Wednesday with losses against most of its major rivals, despite a dismal market mood. The decline was contained, but it’s clear that the tie has changed for the American currency and more declines are now in the docket.
Earlier in the day, China announced a series of measures relaxing coronavirus restrictions, moving away from the zero-Covid policy. However, macroeconomic figures were discouraging. The November Trade Balance posted a surplus of $69.84 billion, as exports fell by 8.7%, while imports were down 1.1%. The poor figures exacerbated concerns about global economic progress.
Another risk-off factor came from Moscow, mid-US session. Russian President Vladimir Putin warned that the threat of a nuclear war is rising, adding that nuclear weapons could be used to defend itself and its allies.
The US Treasury yield curve inverted the most in over forty years, amid concerns related to the global economic growth and uncertainty ahead of the looming US Federal Reserve monetary policy decision. Yields finished the day in the red, as demand for government bonds resurged following news coming from Russia. The 10-year note currently yields 3.43%, while the 2-year note pays 4.26%.
The Euro Area Gross Domestic Product came in better than anticipated in the third quarter of the year, posting an annualized growth of 2.3%. The quarterly gain was o 0.3%, better than the 0.2% anticipated. EUR/USD battles the 1.0500 level, trading a handful of pips above it.
The Bank of Canada hiked its benchmark interest rate by 50 basis points to 4.25% as expected. Policymakers noted that there is growing evidence that the tighter monetary policy is training domestic demand while acknowledging inflation remains elevated. The central ban will be considering whether the policy rate needs to rise further. USD/CAD seesawed between gains and losses, ending the day at around 1.3640.
GBP/USD trades just above 1.2200, while AUD/USD hovers around 0.6730. The USD/JPY pair is down to 136.30, while USD/CHF settled at around 0.9400.
Gold benefited from the broad dollar weakness and trades at around $1,787 a troy ounce, while crude oil prices remained under selling pressure. WTI trades at $72.10 a barrel, its lowest since December 2021
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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.
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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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