The USD eases, oil prices strengthen, equity markets are mixed, US yields rise as risk sentiment wanes on rates and geopolitical uncertainty. The USD slips in early trading, while AUD & NZD gain after China announced a monetary policy shift. Hong Kong equities gain on China stimulus news, while European & US futures are cautious amid political uncertainty in Syria and South Korea, and central bank decisions in several key markets this week. Later this week, the ECB, BoC, the Swiss National Bank are expected to cut rates, while the Reserve Bank of Australia is expected to keep rates on hold. Elsewhere, oil prices rose on China monetary policy move, and Assad's fall in Syria. Bitcoin drops 2% to $98k, while Gold & Silver prices both strengthen. In focus this week, Monday sees no key economic releases. Tuesday, RBA Interest rate Decision, German inflation report, & US Nonfarm productivity. Wednesday, US CPI, BoC Interest Rate Decision & BoC Monetary Policy Statement. Thursday, SNB Interest Rate Decision, ECB Interest Rate Decision, and US PPI report. Friday, German Trade balances, UK GDP, French CPI, will help provide intraday direction to currency markets this week.
In other news. Trump says he won't try to remove Fed Chief Jerome Powell. China vows 'more proactive' fiscal stimulus measures. 'moderately' looser monetary policy. China consumer inflation rate drops to a five-month low, missing expectations as economy slows. South Kora President Yoon banned from foreign travel as leadership crisis deepens. Chinese billionaire Jack Ma sees AI future for Ant Group, in rare appearance. VW workers step up strikes in factory shutdown standoff. Taiwan raises alert as China deploys 90 ships in likely drills. Assad flees Syria for Moscow as rebels seize Damascus. As Canada Post strike drags on, frustration mounts over 'prohibitive' courier costs.
In currency markets. The USD eases, while CNY is steady and AUD & NZD gain after China loosens its monetary policy stance for the first time in 14 years. CNY is up 0.1%, while Asian currencies are flat on average against the USD. Trading currencies are mixed with KRW weakening 0.5%, JPY easing 0.3%, CHF flat, MXN, NOK & SEK firming 0.3%, NZD gaining 0.6%, AUD strengthening 0.9% and ZAR rallying 1.1% against the USD.
In commodity markets. Oil prices firmed by 1.1%. Natural Gas prices rallied by 5%. Gold prices gained by 0.75%. Silver and Copper prices gained by 1.8%. Wheat prices are up by 0.7%, while wheat prices are flat.
CAD eased off 4 1/2 year lows, but remains vulnerable to further weakness ahead of Wednesday's critical Bank of Canada interest rate decision. On Friday, the Canadian Jobless rate hit 6.8% in November, its highest level since 2017 outside of the Pandemic, increasing expectations of a 50 bps rate on Wednesday. "The bank of Canada's policy outlook is weighing on the Canada dollar, and from a technical point-of-view, there's little to suggest the currency will not keep sliding in the near-term," said Shaun Osborne, Scotiabank's chief foreign-exchange strategist.
EURCAD is flat in early trading as investors are sidelined ahead of both ECB & BoC interest rate decisions later in the week.
EUR holds above 1.0550 amid a softer USD ahead of this weeks ECB rate decision and the US inflation report. The euro firmed in early trading finding support from China's stimulus optimism, but the single currency will likely be capped ahead of the ECB rate decision on Thursday. Market's are widely expected to cut interest rates by 25 bps in December, while money markets are pricing in 150 bps ECB rate cuts in 2025. Intraday, we expect the euro will hold within current trading levels with the lack of high tier economic releases today.
GBPEUR edges towards multi-week highs as improving risk sentiment helps the pound, while investors remain cautious for euro ahead of Thursday's ECB interest rate decision.
GBP attempts 1.2800 amid a softer USD as risk-on appetite returns. The pound edges higher in early trading, finding support from the China stimulus news, and shrugs off geopolitical concerns. The has managed to rebound from six-month lows in November, but markets remain cautious after demand for workers collapsed last month after the new Labour government's first budget raised social security contributions. We expect markets to remain cautious heading into this weeks ECB interest rate decision and next weeks BoE & Fed policy decisions.
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