The USD holds steady, oil prices drop, while equity markets are mixed, and US yields ahead of an event-packed week. Currency markets are sidelined, and equity markets are cautious ahead of a busy week of key events that include US inflationary data, the Federal Reserve, BoE, Norway, and ECB interest rate decisions. Elsewhere oil prices extend their losses as Chinese demand concerns persist. The Japanese yen dropped nearly 1% after Bloomberg reported that the BoJ officials saw the need to rush into raising rates. Bitcoin had a volatile start to the week tumbling from 44k to 40k, and then settling at 42k into Europe. The key events this week: Monday sees no key economic data releases. Tuesday sees Japan producer prices, UK employment, and US inflation data. Wednesday Brazil, and the Fed interest rate decision. Thursday, Australian employment, the ECB, BoE & Norway interest rate decisions, and US Retail Sales. Friday, China retail sales, Eurozone PMIs, and the UK Manufacturing PMI.
In other news. Ukraine says no green light for EU membership talks would be 'devastating'. Pork prices extend their plunge in bad deflationary omen for the Chinese economy. Macy's receives $5.8 billion buyout offer, sources say. UK criticizes Western nations 'bored' of supporting Ukraine. Milei takes office pledging deep spending cuts for Argentina. Fighting intensifies across Gaza, raising alarm over potential exodus into Egypt. UK PM Sunak battles to unite a divided part in a pivotal week. In Canada, homeowners who renewed in 2023 pulled back on spending: TD report.
In currency markets. The USD holds steady, supported by rising US yields ahead of the Fed rate decision on Wednesday. CNY weakens to near monthly lows, hurt by increasing deflation signs. Japanese yen weakens as expectations of domestic interest rate hikes fade. CNY weakens by 0.2%, while Asian currencies slip by 0.1% on average vs USD. Trading currencies are under pressure with JPY tumbling by 0.9%, ZAR falling 0.8%, AUD, NOK & MXN weakening by 0.3%, and NZD dipping by 0.1%, while CHF and SEK are flat.
In commodity markets. Oil prices dropped by 0.8%, Natural Gas prices tumbled by 7.3%, Gold prices eased by 0.35%, Silver prices slipped by 0.25%, Copper and Wheat prices weakened by 1%, and Soybean prices firmed by 0.4%.
CAD holds steady vs USD despite weakening commodity prices as investors appear sidelined ahead of the US Fed interest rate decision on Wednesday. The loonie is pivoting at 1.3600, but with increasing risk aversion, sliding commodity prices, and the prospect that the Fed will hold interest rates higher for longer, we anticipate the CAD has room to weaken towards 1.3700 next. Intraday with the lack of any key data releases we anticipate the loonie could ease towards 1.3650.
EURCAD bounces off six-week lows as weakening commodity prices put pressure on the CAD.
EUR consolidates above 1.0750 amid cautious markets ahead of the ECB & Fed interest rate decisions this week. Investors are expected to remain sidelined ahead of Wednesday's Fed interest rate decision and then markets will shift its focus to the ECB's interest rate decision. Both central banks are expected to keep their interest rates on hold, but into 2024 the ECB is expected to take a more aggressive stance on easing its domestic interest rates with many economists speculating the ECB could ease rates as much as 150 - 175 bps in 2024. Intraday we expect the Euro to remain capped at 1.0800 with investors preferring to keep their powder dry ahead of the Fed's decision.
GBPEUR extends gains, rallying from 1.1400 Nov 20th, towards 1.1700 today as markets anticipate the BoE will take a less dovish stance than the ECB in lowering interest rates in 2024.
GBP inches cautiously higher in quiet trading with investors preferring to remain sidelined ahead of the BoE & Fed interest rate decisions. The pound continues to outperform its G10 peers, firming from 1.2500 Thursday to start the week testing towards 1.2600 as many economists expect the BoE to maintain a more hawkish tone vs the ECB & Fed this week. Ahead of the BoE interest rate decision on Thursday, investors will be focused on the UK Claimant Count Change and the UK Employment Change to help prove the direction of the pound. Intraday we expect the pound to be capped at 1.2600.
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