In a market wrap, analysts at TD Securities explained that the GBP briefly rallied against EUR amid news that Germany was willing to accept a more vague statement on relations with the EU, easing the path to a Brexit deal, but gains were short-lived after a German spokesperson said the government position is unchanged.
Key Quotes:
"EM FX was mixed vs the USD, with the Turkish Lira and Argentine Peso improving +1% and +1.22% respectively, while the South African Rand lost -0.55% as the economy entered recession."
"After topping $71/bbl recently WTI crude ran into resistance, reversing nearly 1.5% back to $68.86/bbl on Wednesday. DOE inventories will be on Thursday this week."
"The BoC left rates unchanged at 1.50%, with the forward looking language also largely unchanged."
What We're Watching in Markets
"The rot in EMFX continues, just as the US/China $200bn showdown and the potential implementation of tariffs takes center stage. The G10 will not be immune; most have demonstrated a rising sensitivity to broad EMFX pain. This, along with trade ambiguity, could keep the USD broadly elevated for now.
Treasuries are paying minimal attention to EM tensions as corporate supply, trade concerns, and the upcoming payroll report remain top of mind. Industrial metals remain under pressure as trade tensions and EM weakness persist. Spec positioning continues to be at the lows and it is likely that any rallies will be sold until there is a sufficient resolution to trade war worries."
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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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