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Euro Surges as EU Finally Approved Italian Budget, Dollar Mixed Awaiting FOMC Guidance

Euro rises broadly today as Italy finally got its 2019 budget plan approved by the European Commission. Disciplinary actions are now avoided. Italian 10-yield yields tumbles sharply and is pressing September’s low. For now, Yen follows as the second strongest. Canadian Dollar is recovering today as oil prices turned sideway after this week’s sharp fall. The Loonie also pays little attention to slowing CPI reading. Sterling is the weakest one, followed by Australian Dollar.

Technically, EUR/CHF’s strong rise today re-affirmed the case of near term bullish reversal. Focus will be on 1.1356 resistance next and break will pave the way back to 1.1501 resistance. EUR/AUD also strengthens notably and is eyeing 1.5887 resistance. Break will resume rebound from 1.5346 to 1.6 handle next. Otherwise, EUR/USD, GBP/USD USD/CHF and USD/JPY are staying in familiar range. (if you want to make money in the financial market use our  forex robot)

In other markets, FTSE is up 0.98% at the time of writing, DAX is up 0.57%% and CAC is up 0.61%. German 10 year yield is down -0.008 at 0.238. Italian 10 year yield is down -0.166 at 2.781. German-Italian spread is below 260. Earlier in Asia, Nikkei dropped -0.6%, Hong Kong HSI rose 0.20%, China Shanghai SSE dropped -1.05%, Singapore Strait Times rose 0.43%, mixed.

Released in early US session, Canadian CPI slowed to 1.7% yoy in November, down from 2.4% yoy and missed expectation of 1.8% yoy. CPI core common was unchanged at 1.9% yoy. CPI core median dropped from 2.0% to 1.9%. CPI core trimmed slowed from 2.1% yoy to 1.9% yoy.

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Dollar mixed as FOMC rate decisions awaited

US Dollar is mixed as markets await FOMC rate decision. In short, Fed is widely expected to raise federal funds rate by 25bps to 2.25-2.50% today. The question is on the rate path in 2019 after all the political pressures Fed policymakers faced. The new economic projections will provide the key guidance to market expectations. More on the projections here.

Also, here are some suggested readings on FOMC:

EU Dombrovskis confirmed budget agreement with Italy to avoid EDP

European Commission Vice-President Valdis Dombrovskis confirmed that an agreement is made with Italy regarding 2019 budget. He tweeted that “A lot of hard work and negotiation went into finding solution on the Italian budget. Let’s face it: the solution on the table is not ideal. But it allows us to avoid an Excessive Deficit Procedure at this stage, provided that the agreed measures are fully implemented.”

He added that “I hope this solution would also be the basis for balanced budgetary & economic policies in Italy. Italy urgently needs to restore confidence in its economy to ease financial conditions and support investment. Ultimately, this is what will support purchasing power of all Italians.”

UK CPI dropped to 2.3%, core down to 1.8%

UK CPI slowed to 2.3% yoy in November, down from 2.4% and matched expectations. But core CPI also slowed to 1.8% yoy, down from 1.9% yoy and missed expectation of 1.9% yoy. RPI also slowed to 3.2% yoy, down from 3.3% yoy and missed expectation of 3.3% yoy.

PPI input slowed to 5.6% yoy, down from 10.3% yoy, below expectation of 9.6% yoy. PPI output slowed to 3.1%yoy, down from 3.3% yoy, matched expectations. PPI output core slowed to 2.4% yoy, down from 2.5% yoy, above expectation of 2.3% yoy.

House price index slowe