Support
Dollar eases after spike amid inflation concerns
Focus shifts to the U.S. ADP employment report and the release of FOMC minutes
Japan's Consumer Confidence Index dropped to 36.2
Germany's retail sales fell by 0.6% month-on-month, missing forecasts
Gold remained range-bound amid rising U.S. Treasury yields
Yesterday’s stronger-than-expected U.S. ISM data has rekindled fears of inflationary pressures, particularly with the price index reaching record highs. This has led to heightened expectations for prolonged monetary tightening by the Federal Reserve.
Asian Markets
In Japan, the Consumer Confidence Index for December came in at 36.2, falling short of expectations and slipping from the previous month's 36.4. This highlights continued challenges in consumer sentiment despite a seasonally adjusted framework. Meanwhile, the Japanese yen weakened further, losing around 0.2-0.3%, pushing USDJPY higher by 0.05% to 158.00.
Australia reported a slight uptick in its monthly inflation rate, reaching 2.3% in November compared to 2.1% previously. While above the expected 2.2%, inflation remains at the higher end of the Reserve Bank of Australia’s target range, keeping hopes alive for a potential rate cut as early as February.
European Markets
Germany's economic data delivered disappointing results. Retail sales for November declined 0.6% month-on-month, missing expectations of a 0.5% increase. However, year-on-year retail sales rose by 2.5%, outpacing the forecast of 1.9%.
Factory orders painted a grimmer picture, falling by a steep 5.4% month-on-month, far worse than the -0.3% forecast and adding to concerns about Germany’s industrial sector. Tomorrow’s industrial production data may reflect similarly weak performance, further pressuring Europe’s largest economy.
Currencies
Currency movements started the day on a muted note. The USD eased slightly after yesterday's strong rally. Among gainers, the Canadian dollar stood out against other currencies, likely supported by stable oil prices and optimistic sentiment.
Commodities
Gold (XAU/USD) continues to trade within a range, holding steady after pulling back from resistance near $2,665. Traders are eyeing the FOMC meeting minutes for clues on monetary policy, while rising U.S. Treasury yields remain a headwind for the non-yielding asset. Despite this, uncertainty surrounding President-elect Donald Trump’s potential trade tariffs and geopolitical tensions offers support to the yellow metal.
Oil (WTI) saw marginal gains, hovering near $74.15 in the Asian session. U.S. crude oil inventories fell by 4.022 million barrels last week, according to API data, which could bolster prices further. Market participants remain cautious ahead of the FOMC minutes and Friday’s NFP report.
Looking Ahead
Investors will focus on the U.S. ADP employment report later today, often seen as a precursor to the Non-Farm Payrolls on Friday. Additionally, the release of the FOMC minutes will provide further clarity on the Fed's monetary policy outlook heading into 2025.
