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Euro and Pound Surge on Brexit Progress and Outlook, Dollar Tumbles Broadly

Sterling and Euro rise broadly today and maintain gains in early US session. Progress in Brexit trade negotiations and stronger than expected PMIs lift both currencies as well as their respective stock markets. Canadian Dollar is currently the worst performing one for today, apparently reacting to BoC’s jawboning. Risk-on markets keep Dollar under pressure. Focus will turn to FOMC rate decisions first, followed by SNB and BoE tomorrow, and then BoJ on Friday. Still a long way to go before weekend.

Some FOMC previews here:

Technically, EUR/USD’s break of 1.2177 resistance confirmed resumption in Dollar’s selloff. Immediate focus will be on whether GBP/USD could sustain above 1.3539 resistance, and whether USD/JPY would power through 103.17 low. Gold will also be watched closely as a guidance to confirm Dollar’s move. Firm break of 1875.27 will confirm resumption of whole rebound from 1764.31, and target 61.8% projection of 1764.31 to 1875.27 from 1819.05 at 1887.62 next.

In Europe, currently, FRSE is up 0.56%. DAX is up 1.35%. CAC is up 0.08%. Germany 10-year yield is up 0.0548. Earlier in Asia, Nikkei rose 0.26%. Hong Kong HSI rose 0.97%. China Shanghai SSE dropped -0.01%. Singapore Strait Times rose 0.56%. Japan 10-year JGB yield rose 0.0064 to 0.010.

US retail sales dropped -1.1% in Nov, ex-auto sales dropped -0.9%

US retail sales dropped -1.1% mom to USD 546.5B in November, below expectation of -0.2% mom. Ex-auto sales dropped -0.9% mom, below expectation of 0.2% mom rise. Ex-gasoline sales dropped -0.9% mom. Ex-auto, ex-gasoline sales dropped -0.8% mom.

Canada CPI accelerated to 1% yoy in Nov

Canada CPI accelerated to 1.0% yoy in November, up from 0.7% yoy, above expectation of 0.8% yoy. Prices rose in six of the eight major components on a year-over-year basis. CPI common slowed to 1.5% yoy, down from 1.6% yoy, missed expectation of 1.6% yoy. CPI median was unchanged at 1.9% yoy, matched expectations. CPI trimmed slowed to 1.7% yoy, down from 1.8% yoy, missed expectation of 1.8% yoy.

Also from Canada, foreign securities purchases rose to CAD 6.92B in October. Wholesale sales rose 1.0% mom, versus expectation of 0.7% mom.

EU von der Leyen: Brexit governance issues largely resolved, fishing and level playing field outstanding

European Commission President Ursula von der Leyen said today that “we have found a way forward on most issues” in Brexit trade talks. But “two issues still remain outstanding: the level playing field and fisheries”. Still ” issues linked to governance now have largely been resolved. The next days are going to be decisive.”

“On standards, we have agreed a strong mechanism of non- regression. That’s a big step forward. And this is to ensure that our common high labour, social and environmental standards will not be undercut,” von der Leyen added,

“Difficulties still remain on the question of how to really future-proof fair competition. But I’m also glad to report that issues linked to governance by now are largely being resolved.”

UK PMI manufacturing rose to 55.9, services rose to 49.9

UK PMI Manufacturing rose to 57.3, up from 55.6, above expectation of 55.9, 37-month high. PMI Services rose to 49.9, up from 47.6, below expectation of 50.5. PMI Composite rose to 50.7, up from 49.0.

Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy returned to growth in December after the lockdown-driven downturn seen in November, adding to signs that the hit to the economy from the second wave of virus infections has so far been far less harsh than the first wave in the spring….

“Business optimism about the year ahead also remained buoyant, reflec