Greater optimism over the global economy and hopes for an easing of trade fears supported risk appetite.

Greater optimism over the global economy and hopes for an easing of trade fears supported risk appetite despite wariness over a lack of liquidity.

The dollar was dragged lower by increased optimism in alternative currencies and dipped to 5-month lows amid year-end position adjustment before a tentative recovery on Thursday.

EUR/USD pushed to 4-month highs near 1.1230 as German yields increased while AUD/USD posted a 5-month high before both pairs registered a limited retreat.

Sterling was boosted by firmer global risk appetite and position adjustment with GBP/USD peaking near 1.3280 before a correction.

Precious metals were boosted by a weak dollar and gold traded at 3-month highs.

The dollar overall dipped sharply during the holiday period as yield spreads narrowed. There was also a net reduction in long dollar positions with investors pushing into alternative assets amid year-end portfolio adjustment. Commodity currencies made significant net gains and the dollar index declined to 5-month lows as dollar liquidity was high. The Euro was able to take advantage of US losses and EUR/USD pushed to 4-month highs above 1.1220 amid stop-loss single-currency buying.

New EU Commission head von der Leyen stated that the EU may need to extend the deadline for talks to negotiate a new trade deal with the UK. Markets took a slightly less pessimistic stance towards Brexit despite a high degree of uncertainty.

UK mortgage approvals data for November was above consensus forecasts and the strongest figure since February 2017.

Sterling gained some support from increased confidence in the global growth outlook amid hopes that international trade volumes would strengthen. There was also evidence of improved consumer confidence. EUR/GBP dipped below 0.8500 to near 0.8450 while GBP/USD pushed sharply higher to a peak around 1.3280.

CFTC data recorded a further significant shift in non-commercial positions with a move into a long Sterling position of over 8,000 contracts, the highest reading since May 2018. The shift illustrates that the UK currency will need positive fundamental developments to make headway. Sterling corrected on Thursday with a GBP/USD retreat towards 1.3200 with EUR/GBP around 0.8470.

Economic Calendar

08:45Markit/ADACI Mfg PMI(DEC, 2019)47.547.6
08:55EUR German Manufacturing PMI (M/M)(DEC, 2019)43.443.4
09:30GBP PMI Manufacturing(DEC, 2019)48.347.4
14:30CAD RBC Manufacturing PMI(DEC, 2019)-51.4
14:45USD Manufacturing PMI(DEC, 2019)-52.5
21:30AUD AiG Performance of Service Index(DEC, 2019)-53.7

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.