The USD firms, oil prices weaken, equity markets are down, US yields rise on China concerns and US inflation report. The USD firms before Wednesday's US CPI report, AUD weakens on a dovish RBA, and GBP hits 2 1/2 year highs against EUR. Global equities are down, Stoxx Europe 600 index snapped an 8-day rally as support from China's latest stimulus pledge faded. Investors are sidelined ahead of Wednesday's US Consumer Price Index report, which is the final reading before the Fed's policy meeting on December 18th. Any indication that inflation has returned to the US economy could undercut the chances of a third straight reduction in rates. In China, leaders gave one of their most dovish statements in over a decade, saying they are ready to deploy whatever stimulus is needed to counter the impact of expected US trade tariffs to support 2025 growth. Elsewhere, oil prices are down but are finding support from ongoing geopolitical concerns. Bitcoin gains by 1.2% to $97.8k, while gold prices gain and silver prices ease in early trading. Today sees no high-tier economic releases, so we anticipate markets will be sidelined ahead of tomorrow's US inflation report.
In other news. Brazil's Lula in intensive care after brain surgery. Israel steps up airstrikes and sends troops deeper into Syria. Boeing restarted 737 MAX production a month after the strike ended. Google says it has cracked a quantum computing challenge with a new chip. Stellantis, China's CATL, to invest $4.33 billion in an EV battery factory in Spain. China is ready to go deeper into debt to counter Trump's tariffs. French socialists repeat call for left-wing PM as Macron seeks coalition talks. China sends its largest navel fleet in decades to region, threat level severe, Taiwan says. Trudeau says Canada 'will respond' if Trump imposes 25% tariffs.
In currency markets. Currency markets remain under pressure against the USD, with the Indian rupee hitting a record low; CAD tests fresh four 1/2-year lows. Investors are cautious ahead of a flurry of central bank policy decisions in the next two weeks, including BoC, SNB, ECB, Fed & BoE, which will drive currency market direction into 2025. CNY is up 0.1%, while Asian currencies are flat on average against the USD. Trading currencies came under pressure, with AUD & NZD weakening 0.7%, ZAR falling 0.5%, JPY & NOK easing 0.3%, CHF down 0.15%, and MNX & NOK flat against the USD.
In commodity markets. Oil prices weakened by 0.75%. Natural Gas prices tumbled 2%. Gold prices firmed by 0.4%. Silver & Wheat prices slipped by 0.4%. Copper prices eased by 0.55%, and Soybean prices are up by 0.2%.
CAD tests a fresh four 1/2 year low against the USD from ongoing tariff concerns, as well as caution heading into the BoC interest rate decision and the US inflation report tomorrow. Following Friday's CAD jobs reports, markets are now pricing in a 50 bps cut by the Bank of Canada on Wednesday. If the US CPI shows increasing inflation concerns in the US, this could cause the Fed to pause and increase the divergence between the BoC & Fed interest rates into 2025. A break of 1.4200 could open further weakness towards 1.4350 (March 2020).
EURCAD weakened as fading China stimulus expectations had a greater impact on the single currency.
EUR weakens through 1.0550 as risk sentiment wanes as investors turn cautious. The euro eased in early trading due to fading market optimism from China stimulus, while the USD firms ahead of Wednesday's US inflation report. We expect investors to remain on the sidelines today with a light economic calendar, with markets focused on Wednesday's US inflation report and Thursday's ECB's interest rate decision.
GBPEUR extends gains, testing fresh two 1/2-year highs as markets await the ECB to cut interest rates on Thursday and expectations of a more dovish tone from ECB President Lagarde.
GBP holds steady above 1.2750 despite increasing caution heading into Wednesday's US CPI report. The pound is sidelined, outperforming its G10 peers as the UK remains off Trump's tariff radar and as the Labour government continues to attempt to reset UK relations with the EU, which is seen as positive for the pound. With the absence of any high-tier UK data releases this week, the pound will remain at the mercy of the US CPI report and the ECB interest rate decision to help drive direction for the pound this week.
For clients based in the European Economic Area, payment services for Payments International Inc. are provided by CurrencyCloud B.V..Registered in the Netherlands No. 72186178. Registered Office: Nieuwezijds Voorburgwal 296 - 298, Mindspace Nieuwezijds Office 001 Amsterdam.CurrencyCloud B.V. is authorised by the DNB under the Wet op het financieel toezicht to carry out the business of an electronic-money institution (RelationNumber: R142701).
For clients based in the United States, payment services for Payments InternationalInc. are provided by The Currency Cloud Inc. which operates in partnership with Community Federal Savings Bank (CFSB) to facilitate payments in all 50 states in the US. CFSB is registered with the Federal Deposit Insurance Corporation(FDIC Certificate# 57129). The Currency Cloud Inc is registered with FinCEN and authorised in 39 states to transmit money (MSB Registration Number:31000206794359). Registered Office: 104 5th Avenue, 20th Floor, New York , NY10011.
For clients based in the United Kingdom and rest of the world, payment services for Payments International Inc. are provided by The Currency Cloud Limited. .Registered in England and Wales No. 06323311. Registered Office: StewardshipBuilding 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic MoneyRegulations 2011 for the issuing of electronic money (FRN: 900199)
