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The German ZEW economic sentiment index strengthened to 55.0 for November from 39.0 the previous month and above consensus forecasts of 45.5. The current conditions index edged lower to -66.5 from -64.3 previously and close to market expectations. The Euro-zone index strengthened to 54.4 from 32.8 previously and well above market expectations. The data reinforced expectations that there would be a strong recovery if vaccine treatments prove effective which provided an element of Euro support, although there were still important reservations over the short-term outlook, especially with the risk of further restrictions in Germany.
The November NFIB small business confidence index declined to 101.4 from 104.0 previously as coronavirus restrictions had some impact.
The Euro edged higher after the German data, but was unable to gain any traction and narrow ranges prevailed. The dollar gained some protection from a slightly more cautious tone surrounding risk appetite, but was hampered by expectations that negative real interest rates would be sustained next year as the Federal Reserve maintains a very expansionary policy. There was also an increased element of caution ahead of Thursday’s ECB policy meeting with some speculation that the central bank would look to be more aggressive in boosting monetary policy and could engage in a stronger attack against Euro strength. Overall, the Euro edged marginally lower to just below 1.2100, but secured a renewed advance to 1.2130 on Wednesday as the dollar lost ground against European and commodity currencies.


The dollar was held in tight ranges on Tuesday and edged higher in quiet conditions before settling little changed around 104.15 against the Japanese currency.
There were no comments from Federal Reserve officials with the blackout period still in operation ahead of next week’s policy meeting.
US equities eventually posted small net gains, although risk conditions were slightly more fragile amid unease over near-term coronavirus developments.
Markets also continued to monitor developments towards a fiscal stimulus package with Congressional leaders rejecting the latest proposals from the Administration amid a row of jobless benefits. Overall risk appetite held firm, however, as US equity futures made headway.
Japanese core machinery orders increased 2.8% in the year to October from a decline of 11.5% previously and substantially above consensus forecasts.
Chinese consumer prices declined 0.5% in the year to November from 0.5% previously and the first negative rate since 2009 which triggered some doubts over global reflation expectations. Overall risk appetite held firm, however, and the dollar edged higher to around 104.20 as tight ranges prevailed.


There was further very choppy Sterling trading on Tuesday as markets reacted to Brexit-related headlines with implied volatilities hitting 8-month highs and market volumes also remained high. The UK currency gradually moved lower amid negative rhetoric from UK Prime Minster Johnson. There was a boost early in US trading as the UK and EU secured an agreement on implementing the Withdrawal Agreement. Importantly this includes the Northern Ireland protocol and resolved the Irish border issue. In response, the UK confirmed that the contentious clauses in the Internal Market Bill would be taken out. This agreement was seen as an important boost to the process, especially given strong EU opposition to the clauses which would have broken international law. Sterling rallied, but failed to hold 1.3400 against the dollar.
Late in Europe, EU Chief Negotiator Barnier stated that the chances of a deal were slim and that no-deal was now more likely than sealing a new trade pact with the UK before December 31st. Sterling dipped lower again, although there will be speculation that contingency measures will be implemented to alleviate disruption.
Sterling gained some support from confirmation in a peer review that the Oxford/Astra Zeneca vaccine is safe and effective. After the European close, it was confirmed that Johnson would hold a dinner with EU Commission President von der Leyen on Wednesday evening. The UK currency edged higher on Wednesday amid firm global risk conditions with markets braced for intense volatility later in the day. It was below 1.3400 against the dollar with the Euro at 0.9070 from 0.9120 highs on Tuesday.


The Swiss franc secured fresh support on Tuesday as markets fretted over near-term stresses from coronavirus cases. Gold also posted net gains which helped underpin the Swiss currency. The Euro retreated to around 1.0760 while the dollar failed to secure more than a slight recovery from 5-year lows to trade below 0.8900.
The franc held firm despite increased concerns over Swiss coronavirus developments and the franc maintained firm on Wednesday despite solid risk conditions with the dollar below 0.8900. The Swiss currency gained an element of support from expectations over further ECB easing even with firm risk appetite.




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