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The German ZEW economic sentiment index retreated to 29.9 for December from 31.7 the previous month, although this was above market expectations of 25.1. There was, however, a steeper than expected slide in the current conditions component to -7.4 from 12.5 previously and well below forecasts of 5.0.

The Euro-zone expectations index improved marginally to 26.8 from 25.9 previously which provided an element of relief.

ECB council member Kazimir stated that it was important not to tinker with the APP bond-purchase programme. Fellow member Muller stated that it was not obvious that the central bank increase APPpurchases beyond March given the high level of inflation.

The Euro was unable to secure support ahead of the New York open with the single currency edging lower amid expectations that Euro yields would remain very low over the medium term. Political rhetoric will be watched closely with German Chancellor Merkel officially leaving office on Wednesday.

Markets will remain on alert from hints over the outcome of next week’s ECB policy meeting, especially with the bank facing a high degree of uncertainty.

The US overall trade deficit narrowed to $67.1bn for October from a record $81.4bn the previous month as exports posted a strong gain to a record high on the month.

The Euro retracted further early in New York with a dip to lows just below 1.1230, but it stabilised towards the European close. Risk conditions remained an important driver with commodity currencies making net gains which also curbed dollar demand to some extent.

The Euro secured a net advance to 1.1290 on Wednesday as sellers were unable to push the single currency lower while the dollar failed to secure fresh support.


US Treasuries were little changed ahead of Tuesday’s New York open, but there was fresh selling pressure as US markets opened with the 10-year yield increasing to above 1.45%. Higher yields underpinned the dollar and equities made further strong headway with the strong tone surrounding risk appetite curbing potential defensive yen demand. In this environment, the dollar secured limited net gains to the 113.70 area.

Risk appetite continued to strengthen later in the session with hopes that the Omicron variant was less severe than the Delta variant, but there were still concerns that higher transmissibility would cause major problems for health services, especially given relatively low US vaccination rates.

There were no policy comments from Fed speakers with the blackout period remaining in force ahead of next week’s policy meeting.

The US currency held firm, but was unable to advance further later in the session even with an extension in Wall Street gains.

Japan’s Tankan manufacturing index posted a 4-month high of 22 from 13 previously and the services-sector also recovered on the month. Asian equity markets posted net gains, although there were still reservations over the Chinese outlook and the dollar settled around 113.50 with the Euro around 128.20.


Halifax reported an increase in house prices of 1.0% for November, slightly above consensus forecasts of a 0.8% increase, with the year-on-year increase unchanged at 8.2%. There was no significant impact with expectations that the data would not have an impact on monetary policy.

Sterling held firm into the New York open, but was unable to make further headway despite robust risk conditions and was held below the 1.3300 level.

There were further expectations that the Bank of England would decide against an interest rate hike at the December policy meeting, primarily due to uncertainty over the Omicron variant. There were, however, also expectations of a hawkish policy statement which limited potential selling.

Sterling retreated to near 1.3200 against the dollar while the Euro settled close to 0.8500 after again finding support just below this level. There was a recovery to just above 1.3250 against the dollar on Wednesday, although there were still reservations over domestic Omicron developments and the Euro posted a net advance.


The Swiss franc was able to resist further losses on Tuesday even though overall risk conditions held firm. The Euro was unable to move above 1.0450 and retreated to around 1.0415 at the European close while the dollar eventually posted a net advance to 0.9265 before a fresh retreat.

Uncertainty over the Omicron variant continued to provide net support to the Swiss currency. The Euro was able to secure a limited net recovery on Wednesday, although the dollar retreated to around 0.9235 amid a wider retreat for the US currency.

Technical Levels



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