US dollar strength remains across the board due to continuing market expectations of a Fed rate hike in December. However the euro managed to trim some losses after better-than-expected Eurozone PMI data today.
The euro recovered against the dollar after testing the key 1.0600 level and hit a session high of 1.0643 after the latest Markit flash PMI reading of the composite PMI showed a surprise uptick in Eurozone activity in November. The index rose to a 4½-year high of 54.4 in November from 54.0 in October and beat a 53.9 forecast.
However the bounce in the euro was short-lived as today’s PMI data were not enough to change the market’s expectations of a move by the ECB in December after the strong dovish signals by ECB President Mario Draghi last Friday. The central bank is expected to launch more stimulus measures to stimulate growth in the Eurozone and to fight the risk of low inflation. More QE or a rate cut would be euro-negative.
On the other hand, expectations of a Fed rate hike next month have led to a firmer dollar recently. The diverging monetary policies between the Fed and the ECB pushed the dollar index (which measures the greenback’s strength against a trade-weighted basket of six major currencies), to a seven-month high above 99.80 today.
Sterling was soft against the dollar as investors were being cautious ahead of Bank of England Governor Mark Carney’s testimony before a UK parliamentary committee on Tuesday and the Autumn Statement by British finance minister George Osborne on Wednesday. Close attention will be paid on Carney to see if he will give any hints on the bank’s policy outlook. Also important to watch will be UK GDP data on Friday.
The pound fell to a low of 1.5124 before rebounding to 1.5167.
The dollar consolidated against the yen above 123.00 before falling sharply as the US session came around, to reach 122.80.
One major US data point out today consisted of existing home sales which fell 3.4% in October to a rate of 5.36 million units.
Oil prices bounced higher today to breach the $42 price level after Saudi Arabia (which dominates OPEC) said it would cooperate with all oil producing countries to help stabilize the oil market. The statements from Saudi Arabia came after Venezuela (another OPEC member), warned of oil prices falling to near $20 a barrel.
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