Morning Market Review

EUR/USD

Morning Market Review. The European currency has shown ambiguous trading dynamics against the US currency during the morning session, consolidating near 1.1330. Market activity remains subdued as traders are slow to enter new positions amid growing uncertainty over the spread of the new coronavirus strain. In addition, the end of the week promises to be very eventful in terms of interesting macroeconomic publications, and the November report on the US labor market may take center stage in the economic calendar.

At the same time, the euro is receiving moderate support after the publication of strong data on consumer inflation in the eurozone the day before. November inflation rose 4.9% after rising 4.1% last month. Analysts expected the dynamics to slow down to 3.7%. The Core Consumer Price Index for the same period accelerated from 2.0% to 2.6%, also well ahead of forecasts of 1.9%. Data from Germany indicated a further 34K decline in the number of unemployed in November, which was better than the expected decline of 25K.

GBP/USD

Morning Market Review. The British pound is growing against the US dollar during the morning session, trying to consolidate above 1.3320. The day before, GBP/USD showed active, but ambiguous trading dynamics, briefly renewing record lows since the end of December 2020. The pressure on the British currency was again exerted by traders’ fears about the spread of the new Omicron coronavirus strain. Pharmaceutical companies officials said existing vaccines may show reduced efficacy with a new virus mutation.

The market reacted immediately to this data, and given the already extremely low demand for risk, the pound renewed its record lows. Investors also fear that the threat of new restrictions will catalyze a change in the position of the Bank of England on a possible tightening of monetary policy in December. The British regulator is unlikely to completely correct its course, but it may well take a pause for several months until the situation is clarified. Today, investors will be focused on the speech of the Governor of the Bank of England, Andrew Bailey, who, most likely, will reveal the regulator’s plans in the light of new epidemiological shocks.

NZD/USD

Morning Market Review. The New Zealand dollar is showing strong gains against the US currency, retreating from new record lows, updated the day before when NZD/USD was approaching 0.6770. The instrument is supported by the fact of investors’ distrust of risk amid alarming news about the spread of a new Omicron strain of coronavirus and the return of a number of quarantine restrictions in some regions. The speech of the head of the pharmaceutical giant Moderna Inc., Stephane Bancel, added a negative sentiment to the market. He said yesterday that the current coronavirus vaccines may not be as effective against the new mutation.

A more confident growth of the trading instrument on Wednesday was hampered by not the most confident macroeconomic statistics from New Zealand. Building Permits in October showed a decrease of 2%, repeating the negative dynamics of the previous month. Chinese data also disappointed traders: the Caixin Manufacturing PMI in November fell from 50.6 to 49.9 points, consolidating below the psychological level of 50 points, which separates relative growth from stagnation, while market forecasts assumed a slowdown in the growth of the indicator to only 50.5 points.

USD/JPY

Morning Market Review. The US dollar develops an uptrend against the Japanese yen in trading in Asia, testing 113.50 for a breakout. The day before, USD/JPY showed active multidirectional dynamics and managed to update new local lows from October 11, responding to the news that the current generation of vaccines may not be effective enough against a new variant of coronavirus infection.

In addition, pressure on the American currency was exerted by the speech of the Chairman of the US Fed, Jerome Powell, who noted that the aggravation of the epidemiological situation could negatively affect the pace of recovery of the American economy, which means that the regulator could once again postpone its decision to raise the interest rate. At the same time, Powell generally supported the idea of a faster reduction of the quantitative easing program in case of stabilization of the situation in the markets.

XAU/USD

The price of gold is growing moderately during the Asian session, retreating from new local lows since November 4, updated the day before. During yesterday’s trading, XAU/USD did not manage to consolidate at new highs, after which a wave of sales swept the market. Nevertheless, the metal quotes were supported by the statements of the head of Moderna Inc., who noted a possible decrease in the effectiveness of the current generation of vaccines in the fight against a new strain of coronavirus infection found in South Africa.

On Tuesday, the US dollar was under pressure from weak macroeconomic statistics. S&P/Case-Shiller Home Price Indices in September showed a slowdown from 19.6% (YoY) to 19.1% (YoY), which turned out to be worse than analysts’ average forecasts of a decline to 19.3% (YoY). Chicago Purchasing Managers’ Index in November also fell sharply from 68.4 to 61.8 points, while market expectations assumed a reduction to 67 points. Market participants today will focus on ADP Employment Change, as well as the speech of the Chairman of the US Fed in Congress.