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The Euro pushed sharply higher in early Europe on Wednesday with a more determined break above the 1.1900 level, although there was selling interest on rallies.

US initial jobless claims increased to 778,000 in the latest week from a revised 748,000 the previous week and above market expectations of 730,000. Continuing claims declined to 6.07mn from 6.37mn previously and close to consensus forecasts, but the data overall triggered fresh concerns over near-term trends in the labour market. Durable goods orders increased 1.3% for October on a headline and underlying basis while new home sales declined marginally to an annual rate of 1.00mn and well above market expectations as data in the housing sector remained very strong. Personal income declined for October while spending edged higher.

The PCE core prices index was unchanged for October, slightly below expectations of 0.1%, with the year-on-year increase at 1.4% from 1.6%. This gauge is a key inflation indicator for the Federal Reserve and will reinforce expectations that monetary policy will need to be extremely supportive in an attempt to raise the inflation rate.

The dollar overall was unable to gain any traction and the Euro continued to probe resistance above 1.1900 at the European close.

Federal Reserve minutes from the early November meeting tended to focus on the outlook for asset purchases. Several committee members suggested that the Fed could lower the total amount of purchases but still provide as much support if it bought longer-term bonds and the minutes maintained expectations of a loose policy.

Germany reported that the partial lockdown measures would be extended until December 20th, maintaining near-term unease over euro-zone economic trends. The dollar, however, remained under pressure on Thursday amid flows into other currencies with the Euro at 12-week highs around 1.1930.



Risk appetite was relatively stable during Wednesday with equity markets unable to make further headway amid pressure for  correction. The dollar was unable to make significant headway and traded just below 104.50 at the European close as underlying US sentiment remained weak.

Market optimism over the 2021 outlook remained high, although there were some concerns over policies pursued by President Trump before the January inauguration.

Chinese sources suggested that the central bank is likely to exit some stimulus measures as the economy improves, although with no short-term increase in interest rates. Overall risk conditions held steady on Thursday despite some concerns over the potential for reduced Chinese stimulus.

US markets will be closed for the Thanksgiving holiday and liquidity will remain low on Friday which will maintain the potential for choppy trading conditions, although narrow ranges may prevail. The dollar overall remained on the defensive and traded around 104.35 in early Europe as the yen edged lower on the crosses.


In his spending review, Chancellor Sunak stated that the economic emergency had only just begun and there would need to be a further £55bn in coronavirus support for the next financial year. According to the Office for Budget Responsibility, UK GDP will contract 11.3% for 2020 and, despite forecasts of growth exceeding 5% in the next two years, the economy is not expected to regain pre-covid levels until the end of 2022. The government borrowing requirement was forecast at £394bn for the current year(19% of GDP) with a decline to £164bn next year. Sterling drifted lower amid the unfavourable comparison with other major economies and unease over the medium-term fundamentals. The very high borrowing requirement will also maintain pressure for further Bank of England bond purchases.

Markets continued to monitor Brexit developments closely amid on-going political noise while EU Chief Negotiator Barnier threatened to walk out of talks if there was no shift in UK stance within the next 48 hours. EU Commission President von der Leyen also stated that there was still a lot of work to do, although added that progress had been made. There was little overall Sterling reaction as it consolidated just below 1.3400 against the dollar while the Euro settled just above 0.8900. There is the potential for sharp moves on Brexit headlines, especially with month-end positioning also significant and English coronavirus tiers will be announced on Thursday. 


The Swiss ZEW business expectations index strengthened to 30.0 for November from 2.3 the previous month despite domestic and regional coronavirus concerns.

The Swiss franc dipped significantly ahead of the New York open with the Euro strengthening to 11-week highs at 1.0870, although the franc regained ground later in the session as risk appetite turned slightly more defensive. Franc selling continued to be met with solid buying interest despite negative interest rates.

The franc was slightly lower on Thursday with the Euro around 1.0820, although volatility remained low in comparison with other assets with the dollar around 0.9070.



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