Mixed Signals Drive Market Volatility

Mixed signals continue to drive market volatility. Optimism stemming from robust US GDP growth clashes with caution sparked by the Fed's Beige Book report, while other global factors keep investors on their toes.

Key Factors for Today

• US GDP grows at a stronger-than-expected rate of 5.2% for Q3.
• The Fed's Beige Book hints at slowing economic activity, raising concerns among investors.
• German inflation falls short of expectations, leading to discussions of an ECB rate cut.
• Oil prices surge on reports of Saudi Arabia considering further production cuts and Black Sea storm disruptions.
• Chinese manufacturing contracts for the second consecutive month, calling for potential stimulus measures.

Market Movers

• Gold's rally towards record highs is halted as the US dollar gains ground.
• Eurodollar fails to breach the $1.10 barrier due to cooling German inflation.
• WTI crude oil extends gains in anticipation of OPEC+'s meeting and Black Sea storm reports.
• AUDUSD recaptures losses, supported by upbeat building permits data.

Economic Calendar

• DE Retail Sales
• TR GDP Growth
• FR GDP Growth
• EA Inflation
• CA GDP Growth
• ECB President Lagarde Speech
• PCE Inflation
• Personal Income, Spending
• Initial Jobless Claims
• Fed Williams Speech
• Pending Home Sales

The Big News

US GDP Growth Shines Amid Fed Caution

The US GDP for the third quarter surprised economists, with a revision to 5.2% from the previous estimate of 4.9%. This data points to robust economic growth, but the Fed's Beige Book painted a contrasting picture. The report indicated signs of slowing economic activity across the nation, leading to cautious optimism among investors. While Fed's Raphael Bostic anticipates slower growth and easing inflation pressures, Thomas Barkin keeps the possibility of another rate hike on the table. This dichotomy in views, along with the dollar's strength, temporarily dampened gold's ascent, which reached a fresh high of $2052 before retreating to $2045 an ounce.

German Inflation and ECB Rate Cut Speculation

Eurozone sentiment showed a marginal improvement in November, but the spotlight was on German inflation, which fell short of expectations at 3.2%, below the anticipated 3.5%. This unexpected cooling has ignited discussions of a potential ECB rate cut. As a result, the Eurodollar struggled to surpass the critical $1.10 barrier, reaching an August high of $1.1017 before retreating to 1.0968, with potential further declines to $1.0940. Meanwhile, Spain experienced deflation with a CPI of -0.4%, raising questions about the broader Euro Area CPI figures.

Oil Prices Surge on Saudi Arabia's Potential Cuts

Oil prices extended gains as anticipation builds around OPEC+'s crucial meeting. Rumours circulated that Saudi Arabia might consider an additional 1 million barrels per day (bpd) production cut in the first half of the next year. Meanwhile, the market absorbed the impact of the Energy Information Administration's (EIA) report, which showed a build of 1.764 million barrels versus the expected 0.749 million barrels. Black Sea storm reports added to the bullish sentiment, with WTI crude oil closing 1.55% higher at $77.70 per barrel, inching closer to the $80 mark, while $76.50/bbl remains a potential support level.

Chinese Manufacturing Contracts, PBOC's Dilemma

China's manufacturing sector contracted for the second consecutive month in November, registering a reading of 49.4. This contraction raises concerns about the need for additional stimulus measures to achieve a growth target of "around 5%" for the next year. However, the People's Bank of China (PBOC) faces a dilemma, as it must balance the desire for economic stimulus with worries about the yuan's weakening and capital outflows. Despite these concerns, investors have shown confidence, with AUDUSD rebounding from Wednesday's losses, though strong resistance lies ahead at 0.6650, with potential levels at 0.6677 and 0.6590.