GBP
Sterling chalked up a fourth straight weekly gain last week, the pound’s best run since the start of the year, benefitting from the continued bearish USD trend, while also climbing above the 200-day moving average for the first time in over a year.
There remain few domestic bullish catalysts for the move, though the restoration of political stability and fiscal credibility has helped, with the vast majority of the pound’s strong run coming as a simple function of the dollar continuing to roll over as the market takes a more dovish view of near-term Fed policy.
This week, the UK calendar is again rather quiet, besides Monday’s PMI surveys, which are unlikely to be market-moving. Instead, investors are already likely to be thinking about, and positioning for, next week’s BoE decision.
EUR
The common currency also gained ground last week, rising north of 1.05 once more, again benefitting from broad-based USD weakness, and managing to shrug off increasingly dovish ECB pricing.
A 50bps ECB hike next week now looks locked in from the market’s point of view, especially after last week’s data saw headline CPI beginning to recede from the record highs printed in October.
This week, the calendar is again quiet, with the narrative set to be all about positioning into the aforementioned ECB decision.
USD
The buck continues to struggle against its G10 peers, falling below the 200-day MA last week, and notching its lowest weekly close since June, with markets taking a dim view on the dollar as expectations of the Fed downshifting to a more modest 50bps hike next week grow.
The USD even failed to find support after a remarkably strong payrolls print, with jobs growth significantly exceeding expectations at +263k, and earnings growing by a rapid 0.6% MoM, both evidencing a labour market that is far too tight to be compatible with inflation returning to the 2% target.
Looking ahead, as is the theme across DM, the economic calendar is rather quiet, with all eyes now on next week’s inflation figures, and the final FOMC decision of the year.
World News
China continues to follow their zero covid policy, as over 60,000 new cases were reported in a single day, with sudden lockdowns and heavy restrictions implemented China’s economy is showing the effects. China’s exports and imports contracted further in November due to production disruptions- companies such as Apple are 6 million iPhones behind, and new orders will not be received by customers until after Christmas. This disruption and slowdown in production could have longer term implications for China as companies look to begin more reliable production elsewhere.
Oil prices rose by 0.6% to above $86 a barrel last week, however on Friday the G7 agreed a $60 price cap on oil to prevent Russia benefiting from higher prices during the Ukraine war. The price cap will mean only Russian oil bought for less than $60 a barrel will be allowed to be shipped using G7 and EU tankers, this could make it problematic for Moscow and their ability to sell its oil at higher prices, because many shipping and insurance companies are based within the G7.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Monday 5th December | US | ISM Services PMI | 54.4 | 53.5 |
| Tuesday 6th December | AU | Interest Rate Decision | 2.85% | 3.10% |
| Wednesday 7th December | AU | GDP q/q | 0.90% | 0.60% |
| Wednesday 7th December | CA | Interest Rate Decision | 3.75% | 4.00% |
| Friday 9th December | US | Prelim UoM Consumer Sentiment | 56.8 | 56.9 |
| Share Index | Prev. Close | Open |
| FTSE100 | 7556.23 | 7556.23 |
| DAX | 14529.39 | 14487.43 |
| CAC40 | 6742.25 | 6728.71 |