Gold drops after strong US data

Good morning,

- $XAUUSD has declined for 5 consecutive weeks falling over 9%. A 6th would be its longest weekly losing streak since July 2015.

- $CHF, $NZD, and $AUD are expected to be the most active majors vs $USD with 1W implied volatility at 14.05, 11.75, and 11.17 respectively.

- Brazil's Central Bank leaves benchmark rate unchanged at 14.25%.

- Asian stocks held broadly higher on Thursday as geopolitical concerns eased and oil prices steadied on data showing a lower-than-expected buildup in oil inventories. Traders also cheered the prospects of fresh stimulus amid mounting speculation the European Central Bank will ease its policy further at its meeting next week. While prospects of fresh monetary stimulus kept the euro under pressure, gold hovered close to its lowest level in nearly six years on the dollar strength. The safe-haven Japanese yen weakened in the wake of improved risk appetite. Chinese shares were little changed despite the government lowering various costs for importers and exporters in a bid to boost foreign trade. The benchmark Shanghai Composite was unchanged at 3,647 while Hong Kong's Hang Seng index was up 224 points or 1 percent at 22,722. Japanese shares rose as weakness in the yen boosted export-related stocks.

- Gold prices dropped on Wednesday, hovering just above the lowest level in nearly six years on pressure from a rebounding dollar after strong U.S. economic data heightened expectations of an interest rate hike from the Federal Reserve next month. Manufacturing output rose well above economists' expectations in October and a gauge of U.S. business investment plans surged. "The orders number is surprisingly positive and that's what's weighing on the market," said Rob Haworth, senior investment strategist for U.S. Bank Wealth management in Seattle. Spot gold fell 0.4 percent to $1,070.36 an ounce, not too far from a near-six-year low of $1,064.95 hit last week. On Tuesday it rose 1 percent after news that Turkey shot down a Russian jet near the Syrian border.

- Kiwi Catches its Footing despite Another Spill in Milk Prices.

- Applications for unemployment benefits fell more than forecast last week as claims moved closer to a four-decade low that shows a resilient labor market. First-time jobless claims dropped by 12,000 in the week ended Nov. 21 to 260,000, the fewest in a month, a Labor Department report showed Wednesday. The number of claims reached 255,000 in mid-July, the lowest since December 1973. Companies are limiting dismissals as a tighter labor market has made it more difficult to attract and keep skilled laborers.

- $NZD was the best performing major vs $USD on Wednesday with +0.35% spot-returns while $CHF was the worst performing with -0.50% returns.

- The yield on the benchmark 10-year U.S. government note fell to a three-week low Wednesday while the yield on the two-year note traded near a five-year high, with their yield gap shrinking to the lowest level in nine months. It is the latest sign the bond market is girding for an interest-rate increase by the Federal Reserve next month. Investors have been shedding short-term debt and migrated cash into long-term bonds since late October when Fed officials sent a stronger signal that they were on track to tighten monetary policy for the first time since 2006.

- $KRW was the best performing emerging-market currency versus $USD on Wednesday with +0.91% spot-returns while $BRL was the worst with -1.23%.

- 20-day correlation between $AUDUSD and $XAUUSD (Gold) is now -0.175.

- The European Central Bank will ease policy next week in some way or another, according to economists polled by Reuters, many of whom say the bank cannot pull back now after signalling its intentions so clearly over the past month. Speculation of further stimulus from the ECB has mounted ever since President Mario Draghi indicated in October that the Governing Council would act if needed to drive up inflation to its 2 percent target, a view echoed by several policymakers. The ECB will next decide policy on Dec. 3, less than two weeks before a Federal Reserve meeting in which the U.S. central bank is widely expected to raise rates from zero for the first time in nearly a decade. The likely outcome of both meetings has already been priced in by financial markets, which is why the euro has weakened over six percent against the U.S. dollar since Draghi's comments last month. Inflation, meanwhile, rose to 0.1 percent last month and a core measure is showing signs of strengthening over the past few months. Still, a poll of over 50 economists taken this week showed forecasters predict an 80 percent probability of the ECB announcing further easing next Thursday - roughly the same result as the previous two polls. "It (the ECB) cannot run the risk of disappointing markets, having raised expectations of action. Action in some form or other looks like a racing certainty; it's merely a question of the form it takes," said Ken Wattret at BNP Paribas in London.

- Copper Jumps to Report China Will Probe Short Sales; Oil, Gold Steady.

- Major news for today: Germany Gfk Consumer Climate, EZ Money Supply, Spain Q3 GDP Revision.

Have a great day!