Latest PMI business confidence data to be released.

Bundesbank head Nagel hinted that he would back a smaller 50 basis-point rate hike at the December meeting, but he did not want to get drawn into a debate.

He also commented that rates were still very low and there was still a lot of work to do in raising rates given that inflation picture was likely to remain strong in 2023.

The Richmond Fed manufacturing index improved marginally to -9 for November from -10 the previous month and in line with consensus forecasts. Shipments declined on the month while there were further sharp declines in new and unfilled orders.

Employment edged lower on the month while the rate of wage increases slowed. Although there was a slowdown in the pace of prices paid, prices received increased at a faster rate.

After Tuesday’s European open China announced a tightening of coronavirus restrictions with a negative test result needed within 48 hours of entering public places such as shopping malls.

Risk conditions overall recovered on Tuesday with net gains for equities led by a significant advance on Wall Street. Overall market sentiment held broadly stable on Wednesday.

The latest PMI business confidence data will be released on Wednesday with data due for the Euro-Zone, UK and US.

The overall tone of the data will be important for risk conditions and the relative performance will also be significant for expectations surrounding exchange rate moves.

The Reserve Bank of New Zealand increased interest rates by 75 basis points to 4.25% which was in line with consensus forecasts.

Euro-Zone consumer confidence improved to -23.9 for November from -27.5 the previous month and above market expectations of -26.  The November US Philadelphia Fed non-manufacturing index improved only marginally to -13.6 from -14.9 the previous month.  Lower yields sapped dollar support during the day. Gains in equities also curbed any potential defensive dollar demand. EUR/USD posted gradual net gains to the 1.0300 area with further net gains to 1.0325 on Wednesday.

Lower US yields also sapped dollar support against the yen USD/JPY retreated to near 141.00 before a recovery to 141.40 on Wednesday as the yen lost ground.

The Swiss franc was resilient as lower US yields also supplies net support. USD/CHF retreated to 0.9520 with EUR/CHF settling around 0.9800.

Firm equity markets helped underpin Sterling during the day with little impact from domestic developments. GBP/USD advanced to the 1.1900 before hitting resistance and again challenged this level on Wednesday.

Commodity currencies reversed Monday’s losses with support from a weaker dollar and gains in equities. AUD/USD advanced to near 0.6650, but failed to make further gains on Wednesday. Bank of Canada deputy Governor Rogers stated that higher interest rates are starting to slow the economy and inflation. USD/CAD dipped back below the 1.3400 level and settled at 1.3390 from lows at 1.3350.  NZD/USD was around 0.6180 and close to 12-week highs after the RBNZ policy decision.

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