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Latest Eurostat statistics:
Final GDP +3.9 percent vs +3.7 percent y/y second estimate
Eurozone Q3 final GDP +2.2 percent vs +2.2 percent q/q second estimate
There was no change in the headline reading, but the annual projection was slightly revised upward. The study doesn’t say much because it focuses on the prognosis in light of the recent economic issues.
Current circumstances in Germany, according to the December ZEW survey, are -7.4 vs. 5.0 predicted. As German economic morale deteriorates, the headline reading becomes negative for the first time since June. Supply constraints, rising inflationary pressures, and new viral threats have all conspired to sour the picture.
To begin the day, European stocks opened higher.
Eurostoxx +1.0 percent, Germany DAX +1.1 percent, France CAC 40 +1.1 percent, UK FTSE +0.7 percent & Spain IBEX +0.8 percent
So far, the risk mood has been perfect to start the week. As we attempt to get the day started, US futures are also holding higher. Futures on the S&P 500 are up 0.8 percent, Nasdaq futures are up 0.9 percent, and Dow futures are up 0.7 percent.
As a result, commodity currencies are performing well in the foreign exchange market. The Australian dollar is leading advances, with the AUD/USD pair approaching 0.7100, while the USD/CAD pair is falling, approaching last week’s lows of 1.2713-20.
- The USD/JPY has reached a one-week high, although positive momentum is still restricted.
- The pair has risen 0.2 percent to 113.70, the highest level since November 30.
- The ascent is taking place against a more optimistic risk background, as omicron worries are temporarily put to rest. • Scant evidence continues to suggest that omicron may be more transmissible than delta but is probably less severe, boosting yen pairings in general. The risk remains with individuals who have not been vaccinated, so it is an area to keep an eye on. Lockdown threats are also presented by countries like China, who have a zero-COVID policy.
- A breakthrough above 114.00 clears the way for buyers to try to recoup the loss from November 26. However, as previously said, the viability of this strategy will be determined by viral evolution.
For the time being, the market is operating on the assumption that no news is good news.
- The AUD/USD pair continues to have a positive start to the week, hovering around 0.7100.
- The favourable risk backdrop is the main driving force thus far, although the RBA’s earlier statement isn’t doing any damage.
- The majority of commodity currencies are higher, but the Australian dollar stands out, with the AUD/USD maintaining a recovery off the 0.7000 level after threatening to tumble at the conclusion of last week.
- It’s difficult to see a major and long-term comeback in the pair with the Fed and RBA on opposing courses. However, following a rise from 0.7500 to 0.7000, there may be room for a substantial retracement.
The critical line in the sand for the AUD/USD downside remains 0.7000, which is promising for buyers. With a surge over the 100-hour moving average, buyers have reclaimed some near-term control (red line). However, as long as the price remains below the 200-hour moving average, the bias remains neutral (blue line).
The Aussie may be looking upbeat right now, but don’t rule out the possibility that any gains made this week may be short-lived if negative news on the omicron front emerges in the days/weeks ahead.