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Dollar Shrugs Record PPI, Gold on the Move?

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Commodity currencies remain generally weak today on mixed market sentiment. But buying is turned to European majors, with Swiss Franc having an upper hand. Dollar and Yen, on the other hand, soften mildly. The greenback has little reaction to record PPI reading. Meanwhile, it should be noted that major forex pairs are staying inside last week’s range. In particular, there is no sign of range breakout in Dollar versus Yen and Europeans.

Technically, though, Gold might be offering some hope for return to volatile. It dips notably again today after failing to sustain above 4 hour 55 EMA. We’d continue to favor a downside breakout for now. Break of 1761.76 will resume the fall from 1877.05 to 1721.46 support next.

In Europe, at the time of writing, FTSE is up 0.35%. DAX is down -0.20%. CAC is down -0.03%. Germany 10-year yield is up 0.008 at -0.372. Earlier in Asia, Nikkei dropped -0.73%. Hong Kong HSI dropped -1.33%. China Shanghai SSE dropped -0.53%. Singapore Strait Times rose 0.04%. Japan 10-year JGB yield rose 0.0004 to 0.050.

US PPI rose 0.8% mom, 9.6% yoy in Nov, highest annual rise on record

US PPI for final demand rose 0.8% mom in November, above expectation of 0.6% mom. For the 12-month period, PPI rose 9.6% yoy, accelerated from 8.6% yoy, above expectation of 9.1% yoy. That’s also the largest annual advance on record since November 2010.

PPI less foods, energy, and trade services rose 0.7% mom, 6.9% yoy. The annual rise was the highest on record too, since August 2014.

IMF urges BoE to avoid inaction bias, should prepare markets for more frequent policy moves

In the United Kingdom Staff Concluding Statement of the 2021 Article IV Mission, IMF urged BoE to “avoid inaction bias” in a statement today, despite facing “difficult trade-offs”.

“It would not be a simple matter to see through extended shifts in relative wages and prices while keeping expectations anchored,” IMF said. “It would be important to avoid inaction bias, in view of costs associated with containing second-round impacts. Careful communication would be needed to lay the groundwork with markets for potentially more frequent policy moves.”

IMF said UK economic growth will “remain strong in the near term, but so too will price pressures”. It forecasts 6.8% growth in 2021, and 5% growth in 2022. Inflation would peak at about 5.5% in the spring of 2022, then gradually return to target by early 2024.

UK unemployment rate dropped to 4.2% in Oct, employment rose 257k in Nov

UK unemployment rate dropped from 4.3% to 4.2% in the three months to October, matched expectations. Employment rate rose 0.2% to 75.5%. Average earnings including bonus rose 4.9% 3moy, above expectation of 4.5%. Average earnings excluding bonus rose 4.3% 3moy, above expectation of 4.0%.

Total employment rose 257k to 29.4m in November. It’s also 424k above pre-coronavirus level in February 2020.

Eurozone industrial production rose 1.1% mom in Oct, EU up 1.2% mom

Eurozone industrial production rose 1.1% mom in October, below expectation of 1.5% mom. Production of capital goods rose by 3.0%, durable consumer goods by 1.7%, non-durable consumer goods by 0.4% and energy by 0.1%, while production of intermediate goods fell by -0.6%.

EU industrial production rose 1.2% mom. Among Member States for which data are available, the highest monthly increases were registered in Germany and Slovakia (both +3.0%), Greece (+2.5%) and Denmark (+2.1%). The highest decreases were observed in Estonia (-2.4%), Latvia (-1.5%), the Netherlands and Romania (both -0.9%).

Australia NAB business confidence dropped to 12, come back to earth

Australia NAB business confidence dropped from 20 to 12 in November. Business conditions improved from 10 to 12. Looking at some details, trading conditions rose from 15 to 16. Profitability conditions rose were unchanged at 8. Employment conditions rose from 6 to 11.

“Confidence remains high across states and industries, albeit it has come back to earth a little after the optimism associated with the end of lockdowns,” said NAB Chief Economist Alan Oster.

“Forward indicators are also very strong with a rise in capital expenditure a welcome sign that businesses are beginning to look towards a period of expansion. These results align with the strong rebound in activity that we believe is now underway, as well as a positive outlook for the coming months with vaccination rates now very high.”

Looking ahead

UK employment, Swiss PPI and Eurozone industrial production will be released in European session. US PPI is the main feature later in the day.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 113.32; (P) 113.53; (R1) 113.78; More…

USD/JPY is still bounded in range trading and intraday bias remains neutral for now. On the downside, sustained break of 112.71 will argue that it’s already correcting whole rise from 102.58. Deeper fall would be seen to 38.2% retracement of 102.58 to 115.51 at 110.57. On the upside, break of 113.94 minor resistance will turn bias back to the upside for retesting 115.51 high instead.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high) on resumption. However, firm break of 109.11 structural support will argue that the trend might have reversed and bring deeper fall to 107.47 support and possibly below.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
00:30 AUD NAB Business Confidence Nov 12 21 20
00:30 AUD NAB Business Conditions Nov 12 11
04:30 JPY Industrial Production M/M Oct F 1.80% 1.10% 1.10%
07:00 GBP Claimant Count Change Nov -49.7K -31.5K -14.9K
07:00 GBP ILO Unemployment Rate 3M Oct 4.20% 4.20% 4.30%
07:00 GBP Average Earnings Including Bonus 3M/Y Oct 4.90% 4.50% 5.80% 5.90%
07:00 GBP Average Earnings Excluding Bonus 3M/Y Oct 4.30% 4.00% 4.90% 5.00%
07:30 CHF Producer and Import Prices M/M Nov 0.50% 0.50% 0.60%
07:30 CHF Producer and Import Prices Y/Y Nov 5.80% 4.90% 5.10%
10:00 EUR Eurozone Industrial Production M/M Oct 1.10% 1.50% -0.20%
11:00 USD NFIB Business Optimism Index Nov 98.4 98.4 98.2
13:30 USD PPI M/M Nov 0.80% 0.60% 0.60%
13:30 USD PPI Y/Y Nov 9.60% 9.10% 8.60%
13:30 USD PPI Core M/M Nov 0.70% 0.40% 0.40%
13:30 USD PPI Core Y/Y Nov 7.70% 7.20% 6.80%

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