Quiet Start To The Week Sees Calmer Equities Markets & Softer Dollar

The US Dollar is back under selling pressure across the European open on Monday on the back of fresh strength into the end of last week. A more hawkish outlook from the Fed (rates higher for longer) issued at the FOMC last week helped lift USD off the lows. However, a weaker-than-expected retail sales print saw those gains tempered. With little in the way of tier-one data this week and many traders gearing up for the Christmas break, flows are likely to be much quieter this week.

Key Factors for Today

• USD sees weaker start on Monday following back-end reversal last week
• Equities markets stabilise for now as USD rally pauses
• Weaker USD sees broader FX recovery
• JPY boosted by market chatter about possible change to government/BOJ inflation accord
• Metals higher at the open again today – crude prices stalled

Coming Up

• EUR – German Ifo Business climate
• GBP – CBI Industrial order expectations
• Quiet data sheet today

Equities Losses Pause (For Now)

Equities are looking pretty much flat across the board today as European traders hit their desks. Heavy losses across most indices into the end of last week have subsided for now with mildly positive opens seen in the US, European and Asia. However, on the back of the latest wave of central bank tightening last week, and particularly with fresh ECB hawkishness, indices look vulnerable to further downside this week. Traders will, however, be keeping an eye on the China reopening story for any further positive headlines which might help lift risk sentiment if seen.

Weaker USD Allows For G10 FX Recovery – JPY Boosted by Market Chatter

In FX, the weaker start for USD is allowing for some recovery across the G10 space. EUR looks well positioned to move further higher across the board on the back of last week’s ECB hawkishness. JPY has been higher today too boosted by an confirmed story that the Japanese government is set to revise a 10-year accord with the BOJ, allowing it to become more flexible around its 2% inflation target. No change is expected at the upcoming BOJ meeting this week though traders will be keen to see if there is any shift in the bank’s outlook and guidance.

Metals Higher, Crude Stalled

In the metals and commodities space, both gold and silver are starting the week in the green, following on from the sharp recovery rally we saw off the lows on Friday. Both metals turned firmly higher on the back of weaker-than-expected US retail sales. Crude prices are seeing a softer start to the week with crude futures down from last week’s highs. Global recession fears are still acting as a headwind for oil prices and will drsw further focus this week