Despite a busy economic schedule for the day, markets were off to a sluggish start and correlations were mostly out of sync while asset classes responded to individual catalysts.
Still, some risk-on vibes were evident, as bitcoin hit fresh record highs while U.S. markets cheered Trump’s investment announcement.
Here are the headlines that pushed markets around in the past sessions:
Headlines:
- New Zealand BusinessNZ services index up from 46.2 to 49.5 in Nov
- Australia Judo Bank flash manufacturing PMI in Dec: 48.2 (49.4 previous), flash services PMI: 50.4 (50.5 previous)
- Japan core machinery orders up 2.1% m/m in Oct (1.1% expected, -0.7% previous)
- Japanese au Jibun Bank flash manufacturing PMI in Dec: 49.5 (49.2 expected, 49.0 previous)
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Chinese economic data turned out net negative:
- Foreign direct investment down 27.9% ytd/y (-29.8% previous)
- Industrial production in Nov: 5.4% y/y (5.4% expected, 5.3% previous)
- Retail sales in Nov: 3.0% y/y (5.0% expected, 4.8% previous)
- Fixed asset investment in Nov: 3.3% ytd/y (3.5% expected, 3.4% previous)
- Japan tertiary industry activity index in Oct: 0.3% m/m (-0.1% expected, -0.1% previous)
- Swiss PPI in Nov: -0.6% m/m (+0.2% expected, -0.3% previous)
- French S&P Global flash manufacturing PMI in Dec: 41.9 (43.2 expected, 43.1 previous); flash services PMI: 48.2 (46.9 expected, previous reading upgraded to 46.9)
- German S&P Global flash manufacturing PMI in Dec: 42.5 (43.1 expected, 43.0 previous); flash services PMI: 51.0 (49.5 expected, 49.3 previous)
- Euro area flash manufacturing PMI in Dec: 45.2 as expected; flash services PMI: 51.4 (49.5 expected, previous reading upgraded to 50.8)
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Mixed rhetoric from ECB policymakers:
- ECB official Wunsch said that they’re “broadly comfortable” with market expectations for interest rates
- ECB official Schnabel: We should proceed with caution remain data dependent, can keep cutting but not too quickly
- ECB Chairperson Lagarde: We can cut rates further if incoming data confirms disinflation process
- German’s Chancellor Scholz lost no-confidence vote, snap elections next
- U.K. flash manufacturing PMI in Dec: 47.3 (48.4 expected, 48.0 previous); flash services PMI: 51.4 (50.9 expected, previous reading upgraded to 50.8)
- U.S. Empire State manufacturing index in Dec: 0.2 (6.4 expected, 31.2 previous)
- U.S. S&P Global flash manufacturing PMI in Dec: 48.3 (49.4 expected, previous reading upgraded to 49.7); services PMI: 58.5 (55.7 expected, 56.1 previous reading downgraded to 56.1)
- U.S. President-elect Trump announced a $100B investment over 4 years by Masayoshi Son and the Softbank Group that will create 100K jobs
- BOC Governor Macklem: In the future the world is set to be more prone to shocks than we would like, tariffs cloud outlook but could urge G7 cooperation
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Price action among risk assets diverged from the get-go, as crude oil edged lower during the Asian and London session while bitcoin, gold and U.S. equity futures had a positive run. Mostly downbeat data points from China likely dragged the energy commodity south on a weaker demand outlook.
Flash PMI figures from global economies turned out mixed, as there were signs of strength in the services sector but the manufacturing industry saw deeper contraction in Germany, France, and the U.K.
Bitcoin surged to new all-time highs past the $106K mark while the Nasdaq also scored a fresh record high, likely buoyed by optimism from U.S. President-elect Trump’s announcement of a $100 billion investment from Masayoshi Son and the Softbank Group that will create 100K jobs in the tech innovation sector.
However, the Dow chalked up its eighth consecutive day in the red while U.S. Treasury yields carried on with their bearish trajectory from the previous week, weighing on the U.S. dollar early in the day.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar exhibited a generally bearish tilt as it tracked weaker U.S. bond yields during the Asian session, except against the Japanese yen, before finding support as London markets opened. A bit of a recovery followed, lasting until the start of the U.S. session, as mixed global PMI figures probably boosted safe-haven flows.
USD/JPY remained mostly in positive territory, extending its climb around the start of the U.S. session despite a downbeat Empire State manufacturing index. However, the Greenback turned broadly lower upon seeing mixed flash PMI figures, as the manufacturing sector remained in contraction for December while the services industry saw a downgrade for its November figure.
Still, the dollar was able to recoup some losses versus the weaker Swiss franc (+0.17%) and the Loonie (+0.01%) before the session closed, also holding on to its gains versus the yen (+0.37%).
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. employment data at 7:00 am GMT
- German Ifo business climate index at 9:00 am GMT
- German ZEW economic sentiment index at 10:00 am GMT
- Canada’s CPI figures at 1:30 pm GMT
- U.S. retail sales report at 1:30 pm GMT
- U.S. industrial production at 2:15 pm GMT
- New Zealand GDT dairy auction coming up
Sterling and Loonie pairs could be in for an extra dose of volatility today, as the U.K. economy gears up to print its jobs report (claimant count, unemployment rate, and average earnings index) that could impact Bank of England (BOE) policy expectations while Canada will release the latest batch of CPI figures that are likely to influence the Bank of Canada’s (BOC) rate bias.
Make sure to look out for the U.S. retail sales figures that could also affect dollar direction and overall market sentiment.
Don’t forget to check out our Currency Correlation Calculator when planning your trades!