US consumer confidence bounces back.

US consumer confidence recovered more strongly than expected to an 8-month high of 108.3 for December from a revised 101.4 and well above consensus forecasts of 101.0.

There were significant rebounds for the current situation and expectations components. There was also increased confidence in the labour market for the month.

Existing home sales, however, dipped further to an annualised rate of 4.09mn for November from 4.43mn the previous month. This was below market expectations of 4.20mn and the weakest reading since June 2020. Excluding the June 2020 figure, this was the weakest reading for 12 years.

The Bank of Japan again engaged in an unscheduled market operation to buy bonds in an attempt to cap yields. The dollar held steady on Wednesday with tentative net gains, but the US currency struggled to gain any significant traction.

There were net losses on Thursday amid expectations of seasonal selling pressure during the holiday period.

Liquidity in global markets will fade further ahead of the holiday period surrounding Christmas and New Year with position adjustment remaining a key element.

This will maintain the potential for choppy moves across asset classes over the reminder of this week.

The headline Canadian consumer inflation rate edged lower to 6.8% for November from 6.9% previously, but slightly above consensus forecasts of 6.8% while the underlying rate held at 5.8%.

There was a net increase in the Bank of Canada core inflation metrics.

The Euro secured limited net support from a recovery in German consumer confidence. There was further choppy trading as liquidity declined. US yields tended to drift lower during the day, limiting dollar support. Position adjustment was a significant element during the day. EUR/USD edged below 1.0600 after failing to break 1.0650, but advanced again on Thursday.

Yen volatility remained above normal levels, but conditions calmed to some extent. USD/JPY found some support below the 132.00 level on Wednesday, but failed to break 132.50 and traded just below 132.00 on Thursday.

The Swiss franc resisted any selling pressure on expectations that the National Bank would target medium-term gains. EUR/CHF settled around 0.9830 with USD/CHF below 0.9250.

Sterling was undermined by the latest government borrowing data and failed to draw support from gains in equities. GBP/USD dipped to 3-week lows near 1.2050 before edging back above 1.2100.

The Australian dollar retreated with AUD/USD back below the 0.6700 level, but bounced strongly to 0.6750 on Thursday as hopes for a Chinese recovery provided support. The Canadian dollar was resilient as oil prices edged higher. USD/CAD settled around 1.3620 on Wednesday and traded just below 1.3600 on Thursday.

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