Wednesday 3rd December: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 0.40 %, Shanghai Composite declined 0.15 %, Hang Seng fell 0.90 %, ASX gained 0.80 %
• Commodities: Gold at $1200 (+0.10 %), Silver at $16.38 (-0.45 %), Crude Oil at $67.40 (+0.70 %)
• Rates: US 10 year yield at 2.285, UK 10 year yield at 1.974, German 10 year yield at 0.742

News & Data:

• Australia GDP 0.3 % q/q, Expected: 0.7 %, Previous: 0.5 %
• Australia GDP 2.7 % y/y, Expected: 3.1 %, Previous: 2.7 %
• China Non-Manufacturing PMI 53.9, Previous: 53.8
• China HSBC Services PMI 53.0, Expected: 52.5, Previous: 52.9

Markets Update:

The Aussie Dollar fell to fresh lows overnight as the Australian GDP data came in much weaker than expected. Goldman Sachs is now expecting a RBA rate cut by 25 bps in March and August 2015, joining Deutsche Bank which has a similar outlook. We have seen a low of 0.8387 in Asia, with sovereign names reported to be buyers on this dip. However, AUD/USD is unlikely to catch a bid amid weak econ data and dropping commodity prices. Some support can be expected in the 0.8315/20 area (June/July 2010 double bottom), but then no significant tech support until 0.8070/80.

The USD is strong across the board, with the DXY posting fresh 4 ½-year highs. EUR/USD declined to 1.2370 overnight and while the focus is on tomorrow’s ECB meeting, we have a fair amount of data releases out of the Euro Zone today, which could bring some decent intraday volatility. Solid bids reported from 1.2360 down to 1.2350, but banks note that there are large stops resting beneath that support area and a break lower is likely to trigger further momentum selling. Should we indeed see a break lower ahead of the ECB, look for next chart support around the 1.2250 area, which was the mid-August 2012 low.

GBP/USD is on its way for another 1.5585 test after failing once again to sustain momentum above 1.57. After the recent triple bottom at 1.5585/90, it is unlikely that we’ll see another strong bounce off that support area should we reach it.

USD/JPY rallied to 119.42 overnight. Asia reports that Japanese banks were large buyers at the Tokyo open, mostly for corporate names. Option-related offers capped the topside pre-119.50 and the pair went for a test of the 119.10 support level, which held. Bids said to be resting from 118.70 to 118.60 from various names, while heavy offers lined up pre-120.00 level. System stops through 119.55.

USD/CAD is consolidating around 1.14. The Bank of Canada is expected to leave rates unchanged today and keep their neutral to slightly dovish bias. They are also likely to mention the sharp decline in energy prices.

Upcoming Events:

• 06:45 GMT – Swiss GDP (0.3 % q/q, 1.4 % y/y)
• 08:45 GMT – Italian Services PMI (50.9)
• 08:50 GMT – French Services PMI (48.8)
• 08:55 GMT – German Services PMI (52.1)
• 09:00 GMT – Euro Zone Services PMI (51.3)
• 09:30 GMT – UK Services PMI (56.6)
• 13:15 GMT – US ADP Nonfarm Employment Change (223k)
• 14:45 GMT – US Services PMI (56.3)
• 15:00 GMT – US ISM Non-Manufacturing Services PMI (57.5)
• 15:00 GMT – Bank of Canada Interest Rate Decision (1.00 %)
• 19:00 GMT – US Beige Book
• 22:30 GMT – Bank of Canada Governor Poloz speaks

Source:: Wednesday 3rd December: European Open Briefing