The USD firms, oil prices weaken, equity markets are mixed, and US yields rise as markets await the Feds rates decision. The USD holds at monthly highs as risk sentiment eases and investors await Wednesdays Fed interest rate decision. The CAD tests fresh 4 1/2 year highs after the Canadian finance minister resigns over a policy clash with PM Trudeau. US futures ease after the DOW notches its longest losing streak since 2018, while global equity markets are mixed as investors remain cautious heading into the Fed's final interest-rate decision of 2024 and its monetary policy forecast for 2025. In the UK, money markets have scaled back bets on a Bank of England rates cuts on Thursday, after wage growth accelerated for the first time in over a year. Elsewhere, oil prices eased on demand concerns and caution ahead of the Fed rate decision. Bitcoin tests fresh all time highs, up nearly 1% to $97.1k as hopes grow for strategic reserve, while gold & silver prices both weakened in early trading. Today, the focus will be on the CAD inflation report, and the US Retail Sales report to help provide intraday direction to currency markets.
In other news. Top Russian general killed in bomb blast in Moscow. China plan record budget deficit of 4% of GDP in 2025. UK pay growth speeds up, adding worries for the Bank of England. Japan targets 40-50% power supply from renewables by 2040. Congo files criminal complaints against Apple in Europe over conflict minerals. Canada government adrift after finance minister resigns, Trump tariffs loom. Europe's carmakers discount EVs, hike petrol car prices as new emissions rules loom. Canada Post workers to return to work on Tuesday, but union will challenge the order, saying its unlawful.
In currency markets. CNY stalls near 13-month lows after weak data fuels easing bets. Elsewhere in Asia, Indonesian rupiah & Thai baht ease as investors eye central bank rate cuts and the Indian rupee hits new record lows against the USD on widening trade deficit. The USD edges higher and the GBP firms on hotter UK wage growth. CNY is flat, while Asian currencies are down by 0.1% on average against the USD. Trading currencies are mixed, with ZAR tumbling 1.2%, NOK weakening, AUD, SEK & NZD falling 0.45%, CHF eased 0.25%, MXN flat, JPY firms 0.2% against the USD.
In commodity markets. Oil prices weakened by 0.9%, Natural Gas prices strengthened by 0.7%. Gold prices eased by 0.6%. Silver & Copper prices tumbled by 1.25%. Wheat prices down 0.15% and Soybean prices are flat.
CAD weakens further overnight, testing a fresh 4 1/2 year high after the loonie came under further selling pressure after the surprise resignation of Finance Minister Freeland. The loonie is expected to remain under pressure with the combination of the increasing domestic political uncertainty, the ongoing threat of US tariffs and the expected increasing divergence between the US & Canadian interest rates. Today, the focus will be any political updates from the Liberals, the CAD inflation report and the US retails sales release will help drive intraday direction for the loonie today.
EURCAD edges higher, gaining over 1% in December, testing a fresh six week high as CAD continues under pressure from impact of the finance ministers resignation.
EUR continues to tread water ahead of the Fed policy decision. The euro remains resilient holding onto 1.0500 level, despite easing risk sentiment and mixed sentiment data from Germany. Domestically, markets were muted to mixed data which saw German Business climate, expectations, and current situation sentiment eased, while the German economic sentiment and current assessment both beat expectations. Markets will be focused on today's US Retail Sales, but we expect investors to remain on the sidelines ahead of the Fed's rate decision and the Feds monetary forecast for 2025.
GBPEUR strengthens towards 1.2100 after stronger than expected UK wage growth is expected to add pressure to the BoE to pause rate hikes on Thursday.
GBP rebounds after stronger UK jobs & wage data, ahead of US data. The pound recovered towards 1.27 after the UK unemployment rate held steady at 4.3%, while the average earnings including bonus jumped to 5.2% in 3mo/yr Oct vs 4.4% previously. The pound managed to gain against the USD as markets are widely expect the BoE to keep interest rates on hold on Thursday, while the Fed is expected to cut 25bps on Wednesday. Intraday the US Retail Sales data will be the primary driver the pound today.
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