Morning Market Review

EUR/USD

The European currency shows mixed dynamics of trading against the US dollar during the Asian session, consolidating near the local highs from November 30, updated the day before. The European Central Bank's decision on a gradual tightening of monetary policy provided moderate support to the single currency yesterday. The interest rate remained unchanged at zero, but the regulator will reduce the volume of purchases of bonds under the PEPP program at a slower pace early next year, which will allow it to completely curtail the program by early April 2022. As before, the ECB set a target inflation rate for the start of a rate hike at 2%, noting the existing risks and the ambiguous situation around the detection of the Omicron coronavirus strain. Investors today are focused on November statistics on consumer inflation in the euro area. The Consumer Price Index is expected to slow down from 0.8% to 0.5% on a monthly basis, but maintain the same growth rate at 4.9% on an annualized basis. The core CPI in November may slow down from 0.3% to 0.1%. Also during the day statistics from IFO on the level of business optimism for December is expected to be published in Germany.

GBP/USD

The British pound is trading mixed against the US currency during the morning session, consolidating around 1.3320 amid most of the long profit taking. The day before, the instrument showed steady growth and updated local highs from November 24, which was the market's reaction to a rather unexpected increase in rates by the Bank of England. Citing high inflation, which reached 5.1% in November on an annualized basis (after rising 4.2% in October), the regulator announced an increase in the key interest rate to 0.25%, and the decision was made almost unanimously (8 votes against 1). Thus, the Bank of England became one of the first major central banks in the world to take this step. In addition, the British regulator decided to maintain the volume of UK government bond purchases at 875B pounds. In turn, the US Federal Reserve, which held a meeting the day before, only announced acceleration in the pace of curtailing the quantitative easing (QE) program. The focus of investors today is on the November statistics on the dynamics of retail sales, as well as on the Bank of England's Quarterly Bulletin for Q4 2021.

NZD/USD

The New Zealand dollar shows a moderate decline in pairing with the US currency in trading in Asia, testing 0.6775 for a breakdown. NZD/USD is rapidly correcting after an attempt at active growth the day before, when the New Zealand dollar renewed local highs since the beginning of the month. Not the most confident macroeconomic statistics from the US put pressure on USD on Thursday. The number of Initial Jobless Claims for the week ending December 10 increased from 188K to 206K, which turned out to be worse than the market forecasts of growth to 195K. At the same time, Philadelphia Fed Manufacturing Survey in December fell from 39 to 15.4 points (with the outlook of a fall to 30 points), and the total volume of Industrial Production slowed sharply from 1.7% to 0.5%. Today, macroeconomic statistics from New Zealand exerts pressure on the instrument. ANZ Business Confidence index fell from -16.4 to -23.2 points in December. ANZ Activity Outlook for the same period fell from 15% to 11.8%.

USD/JPY

The US dollar demonstrates multidirectional trading dynamics against the Japanese yen during the Asian session, consolidating near 113.60. The day before, the instrument showed a rather active decline and retreated from its local highs from November 26, responding to the publication of unexpectedly weak macroeconomic statistics from the United States. In particular, investors reacted negatively to the sharp decline in industrial production in December from 1.7% to 0.5%, as well as to the widespread drop in business activity indices in December. Markit Manufacturing PMI fell from 58.3 to 57.8 points, and the Services PMI declined from 58 to 57.5 points. Today, the Bank of Japan published its decision on rates, which, however, had practically no effect on the dynamics of the market. As expected, the regulator kept the interest rate at -0.1%, and also announced the extension of the current programs to support the economy until at least September 2022. At the same time, the Bank of Japan noted an improvement in the prospects for the national economy, despite the persistence of existing risks associated with the pandemic.

XAU/USD

Gold prices are recovering noticeably at the end of the trading week and are currently actively testing 1800.00 for a breakout. The US Federal Reserve's decision to end the quantitative easing (QE) program until March 2022 only excited the "bulls" on the instrument, while the US dollar lost further momentum for growth, since now investors do not expect any significant drivers. In addition, the day before, the US released not the most confident macroeconomic statistics, which forced the markets to pay attention to the real state of the economy in the country. In particular, the number of Initial Jobless Claims again exceeded 200K, and the volume of industrial production in December fell sharply from 1.7% to 0.5%.

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