Europe Summary and Highlights 4 December

European morning session

The USD was generally stronger through the European morning, with USD/JPY and AUD/USD leading the way. USD/JPY gained almost a figure to 150.85, and has now more than fully reversed the gains seen on Tuesday after the announcement of Martial Law in South Korea (since rescinded). AUD/USD fell around 30 pips or 0.5% to 0.6410, testing the overnight lows seen after the weaker than expected Q3 Australian GDP data. EUR/USD fell more modestly, just slipping 25 pips to trade slightly below 1.05. Other European currencies were broadly steady against the EUR.

Final Eurozone composite PMI for November was revised up slightly from the preliminary release mainly due to an upward revision to the French data, but both the Eurozone and French data remained significantly weaker on the month.

Sterling fell with EUR/GBP gaining 20 pips to 0.8 after the FT reported BoE governor Bailey as saying the BoE expected four interest rate cuts next year. In the interview, he said that had been the expectation of financial markets when the BoE incorporated them into its most recent economic forecasts. But EUR/GBP returned to opening levels by the end of the morning

Asia session

The USD/JPY has another test against the 150 figure that failed initially but has got its foothold by lunch time in Hong Kong. While both the U.S. Treasury and JGB yields are retreating, the JGB yields are falling at faster pace than their U.S. counterpart which seems to drive the move. USD/JPY is trading 0.25% higher at 149.96. 

The Q3 GDP for Australia is a miss at 0.3% versus 0.4% expected. Household spending is a laggard as Australians deal with high inflationary pressure. The poor consumption sentiment shall drive the inflationary pressure lower in a near term and could lead to the RBA easing earlier than RBA's currently forecast. AUD/USD is down 0.78% to 0.6436, NZD/USD is down 0.47% to 0.5853 while USD/CAD slipped 0.02% only. Else, EUR/USD and GBP/USD are both up 0.06%.