What you need to take care of on Tuesday, December 6:
The American dollar finished Monday with substantial gains after starting the day on the back foot. The Greenback initially fell on the back of news coming from China, as different districts are easing their restrictive COVID-19 measures, while market talks pointed at further loosening in January.
Markets changed course following the release of upbeat US data, with the US Dollar accelerating its advance ahead of Wall Street’s close. The official ISM Services PMI for November improved by more than anticipated, surging to 56.5 from 54.4 and beating the 53.1 expected. Additionally, Factory Orders rose by 1% MoM in October, better than the 0.7% advance expected, while S&P Global upwardly revised its November Services PMI to 46.2 from a preliminary estimate of 46.1.
Ahead of the December central bank’s meeting, European Central Bank (ECB) policymaker Gabriel Makhlouf said that a 50 bps rate hike is the minimum necessary, adding that he would not rule out a 75 bps hike. The ECB and the US Federal Reserve (Fed) will announce their decisions on December 15 and 14, respectively, and policymakers will enter their blackout period next Thursday.
EUR/USD trades around 1.0480, while GBP/USD plunged to the 1.2160 price zone. Commodity-linked currencies were also under strong selling pressure, with AUD/USD now struggling around 0.6670 and USD/CAD nearing 1.3600.
Crude oil prices surged at the beginning of the day amid Chinese news, which means steady demand, and as OPEC+ announced its decision to maintain its decision of reducing oil production by 2 million barrels per day. Another factor weighing on oil prices was the latest EU decision to put a cap on oil prices. Moscow said it will not recognize the price cap and is preparing a decision. The black gold turned south early in the US afternoon and posted sharp losses amid the broad USD strength. WTI settled at $77.20 a barrel.
Gold surged to $1,810 a troy ounce at the beginning of the day but plunged amid renewed USD demand and ends the day around $1,766 troy ounce.
The greenback surged also vs safe-haven currencies, with USD/JPY recovering towards the 136.70 price zone.
The Reserve Bank of Australia will announce its decision on monetary policy first thing Tuesday.
Cryptocurrencies collapsed with the resurgent US demand. BTC/USD trades around $16,900, down over $1,000 on the day
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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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