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  • DAX hits record high after Gertman factory orders decline.

  • Australian dollar volatility continues, following better-than-expected GDP figure.

  • Bank of Canada rate decision key as markets look for March rate cut.

European markets have started the day on a positive footing this morning with a concerning German factory orders figure bringing yet another reminder over the ECB's need to switch onto a more accommodative footing at the earliest opportunity. The ‘bad news is good news’ environment currently in place for European stocks has seen the DAX hit a fresh record high despite a worrying -3.7% decline in Germany factory orders. While Germany prides itself as the leading driver of eurozone growth, today's slump in both the factory orders and construction PMI figures (36.2) serve to highlight the particular struggle being felt by Europe’s largest economy.

A better-than-expected Australian GDP figure overnight saw the country grow at an impressive annual rate of 2.1% in the third quarter. This week has been particularly volatile for the Australian dollar, with the RBA rate decision seeing markets bring forward expectations for a 2024 rate cut. Given the strength of the Australian dollar over the course of November, this week has seen the currency lose traction as market expectations for a March rate hike disappear in favour of an increasingly likely first rate cut in September.

Looking ahead, the US session looks set to be dominated by the Bank of Canada rate decision, with markets looking for clues from what could be the first bank to cut rates in March. With the bank facing an environment of negative third quarter growth (-0.1%), rising unemployment, and a contractionary composite PMI reading, they are under pressure to perform a dovish pivot as soon as possible. However, while the ECB are expected to cut rates in the face of sub 2% inflation, a March cut from the Bank of Canada would likely have to occur before reaching that key price target. This adds a greater degree of uncertainty, with markets looking for guidance over whether current expectations are justified or not.

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