EURUSD: Market Players Await News Flow Update

The EURUSD notched up robust gains on Tuesday, December 1, with the single currency gaining 1.21% to 1.2067 against the dollar. The price action started to head north during Asian trading after China released a stellar Caixin manufacturing PMI and the RBA decided to hold monetary policy steady. During the European session, sellers tried to resume the downward movement, but encountered euro buying during the North American session.

The dollar came under pressure for the following reasons:

1. An 80-pip rally to 1.3441 in the pound sterling. Tom Newton Dunn of Times Radio said the UK and the EU could strike a post-Brexit trading deal by the end of the week.

2. US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have resumed negotiations on a Covid-19 relief package.

3. The ISM manufacturing index fell to 57.5 in November, down from 59.3 in October (vs. the 58 forecast). Moreover, the employment component fell to 48.4 compared to the previous 53.2. These figures are food for thought as the official US labor market report (non-farm payrolls) will be released on Friday.

4. Fed Chairman Jerome Powell said that the Fed will not hike rates until inflation stays meaningfully above the 2% target for a period of time.

Traders focused on any news bolstering risk appetite, while brushing aside EU difficulties and the lack of headway in Brexit talks (there are only promises that we have been hearing for four years).

ECB President Christine Lagarde said the latest figures show the economy is still suffering. The regulator will adjust some instruments to support the economy so that it recovers at a faster clip after the pandemic.

Todays macro agenda (GMT+3)

13:00 EU: PPI (October), unemployment rate (October)

16:15 US: ADP employment change (November)

16:30 Canada: labor productivity (Q3)

18:00 US: Fed Powell speech

18:30 US: EIA weekly petroleum status report

22:00 US: beige book


Current outlook

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Disclaimer: Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial ...

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