Morning Market Review
Morning Market Review. The European currency has shown slight gains against the US dollar during today’s Asian session, once again trying to consolidate above 1.1300. Trading on Monday was not marked by any active dynamics, as investors analyzed the incoming conflicting information regarding the new strain of coronavirus, the emergence of which caused an increase in panic in the market last Friday. Macroeconomic statistics from Europe provided noticeable support to the quotes of the trading instrument on Monday. The Services Sentiment of the eurozone in November showed a weak growth from 18 to 18.4 points, which, however, turned out to be better than the estimates of analysts who had predicted a decline to 16.3 points.
The Industrial Confidence index for the same period fell from 14.2 to 14.1 points, while the market expected a reduction to 13.9 points. Investors also drew attention to the positive statistics from Germany, where more or less stable tendencies for the growth of inflationary pressure were outlined. In November, the Consumer Price Index rose by 5.2% (YoY) after increasing by 4.5% YoY last month, despite the fact that experts were counting on 5% (YoY).
The British pound is trading with multidirectional dynamics against the US currency, consolidating at 1.3320. The instrument is still holding near its record lows since the end of last December, which were updated last Friday. The market reacted quite intensely to the growing fears about detecting cases of infection with a new strain of coronavirus around the world.
Many European countries were quick to establish restrictions on the entry of citizens from predominantly African states, and skeptics immediately started talking about the imminent return of the lockdown. One way or another, the risks have increased, as the world economy is still far from full recovery, and the world central banks in the current situation may again pause in the matter of tightening monetary policy. In particular, the markets were counting on the fact that the Bank of England may decide to raise the interest rate in December in response to the rising price pressure in the UK.
The Australian currency shows weak growth in pairing with the US dollar in trading in Asia, testing 0.7150 for a breakout. Investors are gradually recovering after the markets began to take a lead from the discovery of a new strain of coronavirus infection in Southern Africa on Friday, November 26.
Traders fear that the new type of infection could be significantly more infectious than the previously identified strain, and will lead to the return of large-scale restrictions on traveling, significantly adjusting the original plans to restore the global economy. In addition, against this background, the world’s leading central banks may abandon their immediate plans to tighten monetary policy.
On Tuesday investors are focused on statistics from China on the level of business activity. NBS Manufacturing PMI in November showed an increase from 49.2 to 50.1 points, which was better than market forecasts of 49.6 points, and the Non-Manufacturing PMI for the same period decreased from 52.4 to 52.3 points, while the forecasts suggested a moderate rise to 53.0 points.
The US dollar is showing a tentative move against the Japanese yen during the Asian session, recovering from a noticeable decline late last week. The market was hit by a wave of sales on Friday, November 26, following reports of cases of a new COVID-19 strain called Omicron. Market participants rushed to get rid of high-risk assets and diversified their portfolios of “safe” currencies. At the beginning of the new week, the market situation stabilizes, which is facilitated by a shift in the attention of traders to macroeconomic statistics and an increase in moderate optimism that the existing vaccines against coronavirus will be able to cope with the new type of infection.
At the same time, the data from Japan still does not please investors with its stability. Industrial production in October showed an increase of 1.1% after falling 5.4% in September, despite the fact that analysts expected a more active strengthening of 1.8%. In annual terms, production is still showing a deep negative trend at the level of –4.7%.
Gold prices are slightly strengthening, holding in the area of psychological resistance at around 1800.00. The day before, the instrument showed mixed trading dynamics, but eventually closed with a slight decline, and did not find additional support from low investor demand for risk. On Friday, November 26, gold quotes rose confidently in response to the movement of capital by investors from risky assets associated with the discovery of a new strain of coronavirus. Additional support to prices was provided by the likelihood of the US Fed revising its previous position on further tightening of monetary policy. Analysts predicted a rise in interest rates immediately after the completion of the quantitative easing program in the middle of next year.