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Overview
The week of Christmas kicked off in a particularly quiet fashion, with no tier 1 data or notable speakers. Price action in FX markets was also notably subdued amid light news to guide moves, however of note Asia Pacific hours saw USD/CNH fall after the PBoC firmed the reference rate for the 1st time in 11 days.
Separately, the USD-index saw a bout of softness during the European morning and as such ends the session in negative territory, benefitting the likes of GBP and EUR, with EUR/USD strength exacerbated as the pair broke above stops at 1.0880. The USD strength saw GBP/USD end the session higher despite some dovish comments from BoE’s Weale over the weekend, who earlier in the year had been considered one of the more hawkish members of the central bank. Weale noted in UK press that further downward pressure on inflation and a ‘pause’ in wage growth means there is less urgency for the BoE to raise rates.
Commodity currencies saw a relatively choppy session, in line with price action in the commodity complex as Brent futures reached their lowest levels since 2004 overnight, before remaining around the USD 36.50/bbl level for the rest of the session and with spot gold grinding gradually higher throughout the session.
Looking ahead, tomorrow is slightly busier, with data coming in the form of US tertiary reading of Q3 GDP and existing home sales, while traders of commodity currencies may also be looking out for the latest API crude oil inventories.
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