Gold falls off a cliff

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Data/Event Risks

  • USD: Busy day for releases, with GDP for Q3 and jobless claims at 1.30pm, followed by pending home sales at 3pm. Q3 GDP may be revised higher, which could assist the dollar. See how to trade this event with EUR/USD. US Treasury Secretary Geithner meets Congressional leaders to discuss the fiscal cliff.
  • EUR: Italian business confidence and EU consumer confidence out this morning. Greece still not out of focus, as questions persist re proposed debt buyback plan. On a more positive note, Spanish banks are to receive EUR 37bn of funding after EU regulators finally gave their imprimatur.

Idea of the Day

Risk assets and currencies suffered for a time yesterday, while safe-haven assets/currencies strengthened, although some soothing words from House Speaker Boehner later on reversed some of the pessimism. In Europe, core 10yr bond yields dropped 7bp, while in Spain the 10yr fell 20bp. Given trepidation surrounding the fiscal cliff, may see more nervousness near-term, so this trend towards safe-havens could well continue. One exception may be the gold price, which mysteriously plunged USD 30 below USD 1,710 for a short time yesterday.

Latest FX News

  • EUR: Crawled lower over the course of the day as mood towards risk darkened. A couple of large SWF’s were omnipresent on the sell-side in terms of both size and consistency, pushing it below 1.29. Recovered later after Boehner’s remarks. Still looks soggy.
  • JPY: Lost ground overnight after LDP leader Abe called for unlimited monetary policy easing until inflation in Japan reaches 2%. Very weak retail sales also contributed to the yen’s softness.
  • AUD: Held very firm amidst the chill winds of global risk aversion. Strengthened later on as risk sentiment became more positive, with the Aussie reaching 1.0480. RBA meets next Tuesday, front end favours another rate cut but local economists are less convinced.  Looks well-bid – upside may continue to be tested near-term.
  • GBP: Cable dropped back below 1.60 yesterday amidst general risk-averse backdrop. Worth watching out for in coming days are any leaks regarding the Chancellor’s Autumn Statement in a week’s time.
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