Market Roundup
• Dollar weakens on confusion over timing of trade truce, China commitments.
• Trump says if no China trade deal possible, 'I am a Tariff Man'.
• Sterling touches 17-month low as May suffers new Brexit setbacks.
• UK PM May's government loses contempt vote over Brexit legal advice.
• Fed's Williams: Further wage growth should raise overall U.S. inflation a bit above 2% target.
• Fed's Williams: Economy is strong but there are risks on horizon.
• U.S. yield inversion spreads on worries about slowing growth.
• Qatar's emir receives invite from Saudi king to attend Gulf Arab summit.
• OPEC has problems with some oil producers, reasons for Qatar's exit must be examined - Iran oil minister.
Looking Ahead - Economic Data (GMT)
• Dec 5 00:30 Japan Nov Services PMI, 52.4 previous
• Dec 5 00:30 Australia Q3 Real GDP QQ SA, 0.6% forecast, 0.9% previous
• Dec 5 00:30 Australia Q3 Real GDP YY SA, 3.3% forecast, 3.4% previous
• Dec 5 00:30 Australia Q3 Final Consumption Exp QQ SA, 0.7% previous
• Dec 5 01:45 China Nov Caixin Services PMI, 50.8 previous
Looking Ahead - Events, Other Releases (GMT)
• Dec 5 N/A ECB Governing Council meeting. No interest rate announcements scheduled
• Dec 5 01:30 BoJ Deputy Governor Masazumi Wakatabe gives speech at a meeting with business leaders in Niigata
• Dec 5 07:00 BoE publishes its final full assessment of the health of Britain's banks and broader financial system before the country leaves the European Union in London
• Dec 5 08:30 ECB President Mario Draghi speaks at an ECB event in Frankfurt
• Dec 5 08:45 On stage conversation by ECB Chair of the Supervisory Board Daniele Nouy at ECB colloquium in Frankfurt
• Dec 5 09:30 BoE publishes Record of the Financial Policy Committee meeting held on Nov. 20 2018 in London
• Dec 5 10:15 ECB Executive Board Member Sabine Lautenschlager chairing a panel discussion at ECB colloquium in Frankfurt
• Dec 5 15:00 Bank of Canada key policy interest rate announcement in Ottawa
• Dec 5 15:15 Fed Chairman Jerome Powell testifies on the economic outlook before the congressional Joint Economic Committee in Washington D.C.
• Dec 5 19:00 Federal Reserve issues the Beige Book of economic condition in Washington D.C.
Currency Summaries
EUR/USD is likely to find support at 1.1300 levels and currently trading at 1.1340 levels. The pair has made session high at 1.1414 and hit lows at 1.1317 levels. The euro slipped lower against the U.S. dollar on Tuesday as optimism that the U.S. and China would quickly resolve their trade dispute dwindled. Washington and Beijing agreed to temporarily end their trade war during talks at the G20 summit in Argentina. But, investors were cautious as deal between the world's two biggest economies was far from a sure bet. A prominent Federal Reserve official's comments about the path of interest rate hikes added to the uncertainty for investors, as did setbacks for Britain's plans to leave the European Union. British Prime Minister Theresa May suffered embarrassing defeats on Tuesday at the start of five days of debate over her plans to leave the European Union that could determine the future of Brexit and the fate of her government.-May wants to secure parliament's approval for her deal to keep close ties with the EU after leaving in March, but opposition is fierce, with Brexit supporters and opponents alike wanting to thwart or derail her plan. An index that tracks the dollar versus a basket of six major currencies was down 0.07 at 96.97.The euro was 0.11 percent lower.
GBP/USD is supported in the range of 1.2630 levels and currently trading at 1.2713 levels. It reached session high at 1.2837 and dropped to session low at 1.2655 levels. Britain's pound declined to hit 17-month low on Tuesday, before recovering some lost ground, in a volatile session dominated by Brexit-related headlines. The British currency fell sharply after Prime Minister Theresa May's government was found in contempt of parliament on Tuesday for refusing to release its full legal advice on Brexit, underlining the depth of opposition among lawmakers to her deal on leaving the European Union. However, sterling rebounded after the government lost a vote in parliament on Tuesday that could reduce the likelihood of Britain leaving the EU without any deal. The defeat could neuter the threat May has been using to persuade lawmakers to back her deal that if they don't, Britain could leave the block without any deal. The pound touched a low of $1.2659, down around half a percent on the day and its weakest since June 2017, before recovering to trade about flat on the day. Earlier in the session, sterling had found some strength after a senior European Union legal adviser said Britain could unilaterally withdraw its Brexit notice, easing some concern among investors about Britain crashing out of the bloc in March without a deal.
USD/CAD is supported at 1.3158 levels and is trading at 1.3262 levels. It has made session high at 1.3255 and lows at 1.3184 levels. The Canadian dollar weakened against the greenback on Tuesday, paring some of its gains from the prior day as investors awaited a Bank of Canada interest rate decision and grew skeptical of the chances of a breakthrough in U.S.-China trade talks. News of a 90-day truce in the trade war between the United States and China helped boost the loonie on Monday, as investors grew more optimistic on the outlook for the global economy. But stocks fell on Tuesday as optimism faded over a speedy resolution to the trade conflict and a flattening U.S. Treasury yield curve set off warning lights about slowing growth. The Bank of Canada has worried that the U.S.-China trade dispute is weighing on global growth and commodity prices. Money markets and a strong majority of economists polled by Reuters expect the central bank to leave its benchmark interest rate unchanged at 1.75 percent on Wednesday, after it hiked the rate in October for the fifth time since July 2017. The price of oil, one of Canada's major exports, pared gains in volatile trading as fears flared that demand would stall due to the U.S.-China trade war, and that Russia remained a stumbling block to a deal to cut global crude supply. The Canadian dollar was trading 0.4 percent lower at 1.3263 to the greenback.
USD/JPY is supported around 112.27 levels and currently trading at 112.77 levels. It peaked to hit session high at 113.00 and made session lows at 112.56 levels. The U.S. dollar dipped against the Japanese yen on Tuesday as greenback was weighed down as U.S. Treasury yields slipped, feeding fears that the Federal Reserve could pause in its rate-hike cycle. The dollar, which started the week on a weak footing as a thaw in trade tensions between Washington and Beijing sapped demand for the safe-haven greenback, extended its fall as investors fretted about an inversion of the short end of the U.S. yield curve in bond markets. The curve between U.S. three-year and five-year Treasury notes and between two-year and five-year notes inverted on Monday - the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt. Dollar also declined as uncertainty lingered regarding China and the United States' ability to resolve their trade war. The dollar was 0.77 percent lower against the Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation.
Equities Recap
European shares fell on Tuesday led lower by auto stocks as investors started to question whether the truce agreed by the United States and China on their trade dispute would lead to a long-term deal.
UK's benchmark FTSE 100 closed down by 0.44 percent, the pan-European FTSEurofirst 300 ended the day down by 0.66 percent, Germany's Dax ended down by 1.15 percent, France’s CAC finished the day down by 0.73 percent.
Wall Street tumbled more than 3 percent on Tuesday, led lower by bank and industrial shares, as the U.S. bond market sent unsettling signs about economic growth and investors worried anew about global trade.
Dow Jones closed down by 3.05 percent, S&P 500 ended down by 3.22 percent, Nasdaq finished the day down by 3.79 percent.
Commodities Recap_
Gold rose to its highest in more than five weeks on Tuesday as the dollar sagged after the United States and China agreed a 90-day pause on fresh trade tariffs.
Spot gold was up 0.7 percent to $1,239.55 per ounce at 1:44 p.m. EST (1844 GMT) after earlier hitting $1,241.86, the highest price since Oct. 26. U.S. gold futures settled up 0.56 percent at $1,246.60 per ounce.
Oil prices pared gains in a volatile trade on Tuesday as fears flared that demand would stall due to a trade war between the U.S. and China, and that Russia remained a stumbling block to a deal to cut global crude supply.
Brent crude oil settled at $62.08 per barrel, or jumped up 0.63 percent. U.S. light crude was last up 30 cents at $53.25.
