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The start of the new trading week after the American Thanksgiving weekend has market participants exhibiting a slight bout of risk aversion this morning, reducing exposure to assets correlated with global growth after a round of disappointing macroeconomic data points released overnight left much to be desired.   The commodity collapse witnessed at the end of last week has seen the velocity of the move abate somewhat, though hydrocarbons are still trading in the red despite having some of the overnight fall retraced as front-month WTI finds Cyber Monday bargain hunters at the $65/barrel level.   Gold has managed to shake-off the rejection of the Swiss referendum that would have forced the Swiss National Bank to hold 20% of its reserves in gold, with 78% voting against the measure.   The yellow metal had been trading soft leading up to the decision, but has since rebounded and is now positive on the session, yet still well below the $1,200/ounce level.

The global glut of manufacturing PMIs that were released overnight did little to boost confidence the waning output in key regions like China and Europe are temporary blips on the radar, with both the official Chinese Manufacturing PMI and the HSBC Final Manufacturing PMI teetering on the brink of contraction, landing at 50.3 and 50.0 respectively.   The effects of the rate cut have yet to flow through to purchasing manager activity, but should help to stabilize some of the downside risks to growth in the coming months, with the cut on the 21stof November likely not the last monetary easing measure by the central bank.

Over in Europe, the final readings on the latest round of purchasing manager activity showed the overall zone’s index level fell from the original flash reading of 50.4 to 50.1, weighed down by slippage in German activity where manufacturing activity skidded into contraction territory at 49.5.   While unlikely to independently influence the ECB’s decision on monetary policy later this week, the combination of weak purchasing manager activity from the zone’s powerhouse along with consistent downward pressure on prices is surely worrisome to Draghi and the rest of the Governing Council.   While it is likely the last meeting before the end of the year will be too early to announce an expansion of asset purchases for the central bank, we believe Draghi’s press conference will focused around the timing of this point, as it looks all the more plausible the ECB takes further accommodative measures in 2015 to ward off disinflation.  The Euro has managed to find a foothold heading into the North American cross, with DXY weakness helping to push EURUSD into the high-1.24s.

Heading into the North American open, equity futures are trading well in the red, looking set to extend Friday’s losses after performance from the American consumer over the Thanksgiving long weekend was lackluster to say the least.   Sales during the four-day Thanksgiving holiday period cratered by 11% compared to the previous year, which the National Retail Federation contributed to better online offerings and more competition in the retail space where consumers are expecting deals to continue later into the holiday season.   So while consumer spending left something to be desired compared to previous Black Friday bonanza’s, we would suggest there is a greater likelihood the holiday shopping season will be more spread out as opposed to lumped together on deal weekend.   The Loonie is managing to claw back some of the excessive losses levied against the currency from late last week, much like the Norwegian Krona has been able to cauterize some of its bleeding and is trying to mount a comeback.   USD softness across the board has allowed the commodity-linked currencies to gain back some ground as traders take profit on the lofty USD strength witnessed in thin holiday trading conditions on Friday.   USDCAD has slipped back below the 1.14 handle, with traders keen to evaluate both the RBC Manufacturing PMI report along with the ISM Manufacturing PMI which are both due later this morning.   While both reports on Canadian and American purchasing manager activity will provide short-term direction for USDCAD, we expect the pair to consolidate and trade within a fairly narrow band until the BoC interest rate decision due on Wednesday.   Given the heightened volatility witnessed in Loonie trading after the OPEC decision last week, make sure to speak with your dealing teams heading intoWednesday’s announcement, and plan for strategies on how to harness the volatility surrounding the central bank announcement.

Further reading:

Weak commodity prices pressure the Australian economy

JPY ready to strengthen, EUR/USD could go south – Elliott Wave Analysis