- Mexican central bank hikes rates 50 bps vs 25 bps expected
- US pushes EU to ready Russian sactions hitting energy and banks
- UK covid cases hit another record
- ECB hawks not happy about extending PEPP reinvestments to 2024 and not setting end date
- Markit Dec US services PMI 57.5 vs 58.5 expected
- US November industrial production 0.5% versus 0.7% estimate
- US November building permits 1.712M vs estimate of 1.663M. Housing starts also better
- BOE's Bailey: Labour market is very tight now
- Lagarde: Risks to the outlook are balanced but inflation significantly higher
- US November housing starts 1.679m vs 1.565m expected
- US December Philadelphia Fed manufacturing index 15.4 vs 30 estimate
- US Initial jobless claims 206K vs 195K estimate
- Canada October wholesale sales +1.4% vs +1.4% expected
- ECB leaves key rates unchanged in December as expected
Markets:
- Gold up $20 to $1798
- US 10-year yields down 3 bps to 1.43%
- S&P 500 down 41 points to 4668
- WTI crude up $1.13 to $72.00
- JPY leads, USD lags
The positive vibes from the post-FOMC risk rally looked like they would continue on Thursday. Commodity currencies stormed ahead and equity futures were solidly higher but a dip in AUD/USD 30 minutes before the US equity trade and a quick fall in USD/JPY signaled a trend change.
That continued to slowly unfold until equities opened and the mood then decidedly shifted. In time, AUD/USD and NZD/USD gave back all their European gains and the yen made broad progress.
The BOE decision came as a surprise but both the long and short end of the UK curve were lower in yield on the day, suggesting either year-end is the larger factor at the moment or that bonds think central banks could overdo it. The US belly was also down in yield after an early push higher.
Gold was a winner throughout the turmoil and is set to close at the best levels in a month. That raises the question: Have we seen the worst? There aren't many gold bugs left to answer that question.
Oil and the loonie shook off the emerging negative tone and held up relatively well. That will be something to watch on Friday.
The ECB headline for me is the much higher 2022 inflation forecast. Given the dynamics in Europe they have a bit more leeway on prices but with energy and gas soaring, I wonder how long that rope is. The euro tried to get above 1.1350 but couldn't on the first time of asking during the press conference. It then fell back to 1.1300 before getting some benefit from risk aversion late to climb to 1.1333.
