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Overview: The US dollar is under pressure today. Stronger European final PMI readings and a pullback in US yields have seen the greenback sell through last month's lows against several G10 currencies. And even where the data disappointed, like Australia's Q3 GDP or Switzerland's CPI, the currencies are bid. Led by central European currencies, most emerging market currencies are higher with Türkiye, Russia, India, and the Philippines the exceptions. 

Equities were mixed in the Asia Pacific region but are firmer in Europe, and US index futures are trading a little higher. Chinese shares in Hong Kong and the mainland fell by more than 1%, while the Nikkei and South Korea's Kospi gained more than 1%. The 0.30% gain in Europe's Stoxx 600 is enough to lift the benchmark back into the green for the week. Japan's long-end bond yields rose 2-4 bp, while European benchmark yields are slightly firmer. The 10-year US Treasury yield that reached almost 4.12% yesterday is around 4.08% now. Gold has been capped near yesterday's high (~$4236) and is slipping through $4200 in the European morning. Copper is trading at a new record high. January WTI is firm but inside yesterday's range and remains between $58-$60 for the fourth consecutive session. 

USD: The Dollar Index held important support near 99.00 on Monday and briefly traded slightly above 99.55 yesterday to meet the (38.2%) retracement of the decline from the November 21 high (~100.40), but it settled on its lows and gapped lower today. The gap is found between yesterday's low, slightly above 99.30 and today's high, slightly below 99.30. It is back near 99.00 and a break is potentially significant. It is not only last month's low, but it is also neckline of a possible double top that projects to around 97.70, which is around the (61.8%) retracement of gains since the year's low was recorded on September 17 (Fed Day). There are several high frequency economic reports today. The market is bound to be more sensitive to the ADP private sector jobs estimate and the ISM services than to the import/export prices and industrial output figures for September. The final services and composite PMI are also due often do not attract the same attention as the fairly accurate flash estimate. 

EURO: After consolidating yesterday, but closing firmly, buying today lifted the euro to nearly $1.1665, slightly above last month's high. Today's buying was aided by the stronger than expected final November services and composite PMIs. The next target is near $1.1700. The aggregate composite PMI rose to 52.8 from 52.4 initial estimate (52.5 in October). After the sixth consecutive monthly increase, it is the highest since April 2023. The final German composite PMI is at 52.4 (52.1 flash). It was 53.9 in October, the best since April 2023). The final French composite PMI stands at 50.4 (49.7 preliminary estimate and 47.7 in October), the first reading above 50 since August 2024. Spain's composite PMI slipped to 55.1 from 56.0 and Italy's composite PMI rose to 53.8 from 53.1, its best since April 2023. 

CNY: The dollar has been sold to a new low for the year against the offshore yuan, slightly below CNH7.0570. The PBOC set the dollar's fix higher yesterday, but the greenback continued to trade with a softer bias against the offshore yuan. The PBOC set the dollar's reference rate a lower today at CNY7.0754. Many continue to suspect the PBOC is guiding the dollar toward CNY7.0, and although some news wires report that state-owned banks have bought dollars in recent days, few seem to be confusing it with intervention. Yesterday, the PBOC confirmed it bought a net CNY50 bln (~$7.1 bln) of government bonds in November, following CNY20 bln net purchases in October. It is expected to buy more bonds this month for year-end purposes and to blunt pressure emanating China Vanke debt repayment challenges. 

JPY: The dollar pulled back from approaching JPY157.90 on November 20 to a low on Monday near JPY154.65. The pullback met the (38.2%) retracement objective of the rally from the October 17 low and last time it traded below JPY150. However, the jump in US rates appeared to have lent support to the dollar. The greenback is consolidating quietly today in about half-of-a-yen range above JPY155.50, around where the 20-day moving average is found. Options for almost $1.3 bln are also struck there that expire today. A break could signal a re-test on Monday's low. Japan's final November services and composite PMI were reported today, but the market had responds to the flash estimates, let alone the final reading. Still, for the record, the November composite PMI was confirmed at 52.0, matching the year's high seen in February and again in August. Meanwhile, the swaps market continues to discount about an 80% chance of a hike when its two-day meeting concludes on December 19. The market is pricing in another 25 bp hike in 2026. 

GBP: Sterling recorded a four-day low near $1.3180 in the North American morning yesterday. It recovered but remained capped near the session high around $1.3220. With the help of a heavier dollar more broadly, and upward revisions to the flash PMI have lifted sterling to almost $1.3290. This meets the (38.2%) retracement of the losses since the September 17 high (~$1.3725). The 200-day moving average is around $1.3320 and the (50%) retracement is slightly shy of $1.3370. The UK's final November services and composite PMI were revised to 51.3 and 51.2 from 50.5 preliminary estimate. down from the October readings of 52.3 and 52.2 respectively. The swaps market remains confident that the Bank of England will cut the 4.0% base rate when it meets on December 18. Another cut is nearly fully discounted by the end of April 2026. 

CAD: The US dollar recorded the session high yesterday near CAD1.4015 in early North American turnover. This met the (38.2%) retracement of the leg down from the November 21 high (~CAD1.4130) to low at the end of last week (~CAD1.3940). In quiet afternoon dealings, the greenback slipped slightly below CAD1.3970. It has retested last week's low in European turnover today. A break target CAD1.3920 initially and then the October low slightly below CAD1.3890. Canada reports Q3 productivity and the recovery in the economy suggests productivity improved (~0.5% after -1.0% in Q2). Canada also sees its services and composite PMI. Recall that the October composite PMI rose above 50 (50.3) for the first time this year,  

AUD: For the eighth consecutive session, the Australian dollar has risen above the previous session's high. It has been bid to almost $0.6590 today, its best level since late October. The $0.6565 area, which it tested on Monday as well, corresponds to the halfway mark of the sell-off from the year's high on September 17 (Fed Day) to the low near $0.6420 on November 21. The (61.8%) is near $0.6600 and the October high was around $0.6620. Australia reported the economy grew by a disappointing 0.4% (0.7% in Q3 after 0.6% in Q2). Separately, the final November composite PMI was confirmed at 52.6, it best reading in three months. Last November it was at 50.2. 

MXN: The dollar was confined to a narrow range around Monday's settlement (~MXN18.3050). Monday's low was about MXN18.2525 to marginally take out last month's low. It briefly slipped below MCN18.25 today. The low for the year was recorded on September 17 (Fed Day) near MXN18.20. The (61.8%) retracement of the dollar's gains since last year's low (~MXN16.26) ahead of the run-up to the election is a little above MXN18.18. Mexico reports September's gross fixed investment today, but the impact may be negligible. Q3 GDP, which has already been reported (0.3% quarter-over-quarter) already assumed the fourth consecutive quarterly contraction. Consumption was thought to be a drag on Q3 GDP, too. Still, on a year-over-year basis it eked out a small gain in July (0.06%) and August (0.08) but is thought to have snapped back in September. September's private consumption will be reported today, and the median in Bloomberg's survey is for a 1.6% gain, which would be among the strongest reading this year. 

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