US dollar slumped on lower long-term US yields

Market movers today

  • Germany is due to release factory orders for October this morning. In line with strong surveys, German order growth has been strong in recent months and showed the highest growth rate in six years in September of 9.5% y/y.

  • The ECB's Yves Mersch is due to speak in Frankfurt (11:30 CET ) on the theme ‘Challenges for Monet ary Policy in 2018', and will be the last ECB speaker before the silent period ahead of the December meeting.

  • This afternoon, the US ADP employment report for November is due. It is not a good predictor of the monthly non-farm payrolls but nevertheless tends to get some attention as a warm-up for Friday 'spay rolls (see also US Labour Market Monitor: Expect strong November report). The October ADP employment increase was quite robust at +235k.

  • The Bank of Canada is due to announce its rate decision at 16:00 CET. We and consensus expect rates to be unchanged at 1.0%. The Bank of Canada raised rates in July and September by 25bp at each meet ing.

  • This afternoon, the DOE is due to release US crude oil inventories.


Selected market news

Asian stock markets slipped this morning, dragged by earlier losses on Wall Street as the technology sector stuttered yet again after a brief rebound, while the US dollar slumped on lower long-term US yields. The spread between five-year and 30-year US yields fell below 60bp, which is the lowest since November 2007. Industrial metals also plunged overnight on the prospect of slower Chinese demand, dollar gains and a rise in stockpiles. S&P 500 futures are slightly higher this morning, shrugging off reports that Republican efforts to avoid a government shutdown have stalled.

US President Donald Trump is expected to make an announcement today about moving the US embassy from Tel Aviv to Jerusalem, thereby implicitly recognising it as the capital of Israel and upending decades of US foreign policy. Such a move has been strongly criticised by Arab leaders and risks fuelling renewed violence and conflict in the Middle East .

In Norway, the November Regional Network Survey, which is Norges Bank's preferred gauge of economic activity, indicated improved growth prospects in all sectors besides construction, with capacity utilisation at the highest level since 2013.

This morning we published Danske Bank 2018 Fixed Income and FX Top Trades . In the fixed income sphere, we recommend positioning for further performance for carry strategies, small moves in out right yields, performance for Danish and Swedish fixed income, periphery performance, tighter USD liquidity in the CCS market and a further flat tening of the US yield curve . In it , we focus on five themes: (1). cyclical support for carry – but volatility is low, (2) policy normalisation, (3) a ‘new' Fed, (4) Scandi housing fragility and (5) currency vulnerability as the foundation of our trades.

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