Risk conditions were slightly less robust amid reservations over near-term coronavirus developments as US cases and deaths increased.

Wall Street equities moved lower after Wednesday’s European close with concerns over legal action in the tech sector contributing to selling.

Risk conditions were slightly less robust amid reservations over near-term coronavirus developments as US cases and deaths increased. The dollar was able to recover some ground, but struggled to sustain the advantage amid choppy conditions.

EUR/USD retreated to lows near 1.2050 before settling just below 1.2100 amid caution ahead of the ECB meeting.

Commodity currencies were also subjected to high volatility with AUD/USD retreating from 29-month highs, but with buying on dips.

The German trade surplus increased to EUR18.2bn for October from EUR17.6bn previously, although export growth was slightly below expectations at 0.8%.

There was further uncertainty over the EU budget with attempts to resolve the dispute with Hungary and Poland ahead of Thursday’s EU Summit.

The Euro was unable to make further headway in early Europe and gradually lost ground with a retreat to below 1.2100 as the US dollar also pared losses against major currencies. There was some evidence of year-end demand for the US currency, although dollar sentiment overall remained negative.

US JOLTS job-openings increased to 6.65mn for October from 6.49mn previously and slightly above consensus forecasts.

The dollar gained renewed support later in the European session, especially as equities started to lose ground, and commodity currencies also surrendered gains. In this environment, EUR/USD retreated to lows around 1.2060, although ranges were still relatively narrow.

The ECB will announce its latest policy decision on Thursday with expectations that the bank will expand its bond purchases under the PEPP programme and also offer further cheap loans to the banking sector. Rhetoric on the Euro from President Lagarde will be watched closely, especially with EUR/USD trading above the 1.2000 level.

Germany reported a record number of new coronavirus cases which maintained reservations over the near-term outlook. The dollar was unable to secure further support on Thursday as commodity currencies secured renewed gains and EUR/USD traded just below 1.2100 in early Europe.

Chinese new loans increased sharply by CNY1,430bn for November following a CNY690bn increase the previous month and slightly above consensus forecasts. M2 money supply growth strengthened to 10.7% from 10.5% previously which curbed unease over the risks of a Chinese slowdown.

The Japanese yen gained some support from weaker risk conditions and EUR/JPY retreated to below the 126.0 level. As the dollar secured wider support USD/JPY strengthened to the 104.40 area before fading again as US equities moved lower with underlying yen selling still subdued.

There were further concerns over near-term US coronavirus developments with news cases of over 217,000 reported for Wednesday and the daily death toll also increased sharply  which maintained unease over the short-term trends. There was no progress towards a US fiscal stimulus package during the day with developments watched closely.  The yuan faded on Thursday which provided an element of dollar support in choppy trading with USD/JPY edging higher to the 104.40 area.

Sterling made significant gains ahead of Wednesday’s New York open with some optimism that the talks between UK Prime Minister Johnson and EU Commission President von der Leyen would potentially result in a breakthrough and push negotiators towards a deal within the next few days.

UK currency gains gradually faded as caution prevailed ahead of the meeting and political rhetoric was generally negative ahead of the meeting. Sterling was also unsettled by warnings that London could be placed in the highest coronavirus tier due to an increase in cases.

After prolonged discussions over dinner, reports suggested that the meeting between Johnson and von der Leyen had not made significant progress and that there were still large differences in positions. Discussions would continue over the next few days with a firm decision due by Sunday.

Sterling dipped lower early in the Asian session, but attempted to stabilise on Thursday. UK GDP increased 0.4% for October, in line with consensus forecasts with expectations of a fourth-quarter contraction, although production data stronger than expected. GBP/USD traded just below 1.3350 while GBP/EUR strengthened to 1.1100.

Economic Calendar

07:00GBP Industrial Production (Y/Y)(OCT)-6.50%-6.30%
07:00GBP Industrial Production (M/M)(OCT)0.30%0.50%
07:00GBP Manufacturing Production (M/M)(OCT)0.30%0.20%
07:00GBP Manufacturing Production (Y/Y)(OCT)-8.40%-7.90%
07:00GBP Trade Balance(OCT)-9.60B-9.35B
07:00GBP Trade Balance Non EU(OCT)-1.40B-1.65B
07:45Industrial Output MM(OCT)1.40%
12:45Deposit Facility Rate(DEC 01)-0.5
12:45ECB Rate Decision(NOV)
13:30USD CPI (M/M)(NOV)0.10%0.20%
13:30USD CPI (Y/Y)(NOV)1.20%
13:30USD CPI Ex Food & Energy (Y/Y)(NOV)1.60%
13:30USD CPI Ex Food & Energy (M/M)(NOV)0.20%0.20%
21:45NZD Electronic Card Retail Sales (M/M)(NOV 01)8.80%
21:45NZD Electronic Card Retail Sales (Y/Y)(NOV 01)8.20%

*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.