Here are the top things you need to be aware of, prior to your trading in the US markets on Tuesday, December 11:
1. Brexit: May’s plan is to win deal sweeteners from EU, then go back to parliament.
PM May reportedly is in talks with EU leaders to try and get more concessions. Whether this will be successful remains to be seen, as EU leaders are in no mood to unwrap the agreed package. The European leaders’ summit on Thursday, according to Tusk’s spokesman, will be specifically discussing preparations for a no-deal Brexit scenario. Bottom line is that it remains doubtful whether May will win sufficient concessions on the backstop to shift enough opinions in parliament.
2. Global stock markets rebound; Softer Dollar.
The Dollar traded moderately softer amid a backdrop of rebounding global stock markets, and was showing losses of between 0.2% and 0.5% versus the Yen, Euro and Sterling heading into the New York interbank open. Stock markets have found a footing on news that the US and China are talking, though sentiment remains fragile.
Market Reaction: EURUSD recovered to the upper 1.1300s, extending a rebound from yesterday’s low at 1.1400 but remaining comfortably below yesterday’s 2-week high at 1.1442. USDJPY has settled in the lower 113.0s after capping out at a 1-week high yesterday at 113.36. GER30 and UK100 are up 2.00%.
3. France adds to EU’s budget headache.
French President Macron caved in to protesters and last night unveiled a spending package that included a 100 Euro/month hike in minimum wages as well as the scrapping of taxes on pensions and could well bring France in conflict with the EU’s budget rules. Progress on the country’s deficit hasn’t been great in recent years and if France also overspends, the EU will have trouble to get Italy to play ball without also putting further pressure on France. It is less likely that countries like Germany will agree to a common fiscal policy and further debt-mutualisation, which will weaken the EU’s chances of progress in the long run.
Market Reaction: The CAC 40 has been doing well today, but French bonds were under pressure and underperforming versus Gilts as well as Bunds, with the 10-year rate jumping 3.3 bp to 0.721%.
4. Treasury Yields settled below highs following the uptick in PPI.
PPI rose by 0.1%, with the core component 0.3% higher, both slightly hotter than forecast. There were no revisions to October’s respective gains. Goods prices fell 0.4% versus the prior 0.6% gain, thanks to a drop in energy prices. On a 12-month basis, the headline slowed to 2.5% y/y versus 2.9%, but the ex-food and energy component picked up to 2.7% y/y versus 2.6% y/y.
As data came in above expectations on both headline and core, focus will quickly shift to CPI ahead of the Fed decision next week.
Market Reaction: The Dollar edged slightly higher after the warmer PPI outcome.
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Andria Pichidi
Market Analyst
HotForex
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