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    European Session – Dollar up but below highs; commodities rally on China data

    European equities held on their gains from the morning as trade sentiment remained risk on. Markets were given a boost earlier today from better-than-expected trade data from China, which showed exports and imports declining at a slower pace than in recent months. A steadier yuan also helped market sentiment.

    The euro came under pressure against the dollar as safe-havens lost their appeal. The single currency hit a low of 1.0804 dollars before climbing back up to 1.0847 dollars in late European session. Disappointing Eurozone industrial production figures had little impact on the euro. Data from Eurostat showed industrial production contracting by a bigger-than-expected 0.7% month-on-month in November versus estimates of a 0.3% drop.

    There was some good news for euro area inflation though as inflation in Greece turned positive in December for the first time in nearly three years, while French inflation also came in above expectations for the same period.

    Sterling was firmer on Wednesday after touching a 5½-year low against the dollar yesterday on weak industrial output data. The pound had recovered to 1.4433 dollars in late European trading.

    The Swiss franc fell to a one-week low today as risk appetite returned to the markets. The dollar hit a high of 1.0105 francs before easing to 1.0080 in late European session. But the euro shot up to a 3-month high of 1.0940 francs. Comments by an SNB board member that the franc is “considerably overvalued” underlined the central bank’s willingness to intervene in the markets if necessary.

    The dollar was also stronger against the yen, trading around 118.19 yen in late European session. The greenback had risen to one-week highs earlier in the day but came under some pressure on comments from Boston Fed President Eric Rosengren who said that the Fed’s forecast of four quarter-point rate rises in 2016 has downside risks.

    Commodity currencies such as the Canadian and Australian dollars benefited from stronger commodity prices today. The Canadian dollar bounced back from Tuesday’s 13-year low as oil prices looked set to close higher on Wednesday for the first time this year. The greenback was down at 1.4230 against the loonie, while the aussie held above 0.70 after it was given a lift from the positive China trade data.

    Crude oil prices rebounded sharply today after dropping below $30 a barrel yesterday for the first time since late 2003. US crude futures were 3% higher in late European trading at $31.38 a barrel. Copper prices also moved higher, climbing to $1.9630 per pound on news that China imported more commodities in December.

    With no major data expected out of the US today, investors will be looking to tomorrow’s unemployment data out of Australia as well as the latest machinery orders from Japan.

    Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.


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