Fed minutes back slower rate hikes.
The Euro-Zone PMI manufacturing index recovered to a 2-month high of 47.3 for November from 46.4 previously and above consensus forecasts of 46.0.
The services index was unchanged at 48.6 and also slightly stronger than market expectations.
Overall business sentiment has remained in contraction territory for five months and overall business confidence remained very fragile. There was an easing in supply-chain pressures while inflation pressures moderated.
According to the flash data, the UK PMI manufacturing index was unchanged at 46.2 for November and above consensus forecasts of 45.7 while the services-sector index was also unchanged at 48.8 and above market expectations of 48.0.
Overall business confidence recovered slightly amid an easing of political uncertainty, but it was still the second-weakest reading on record with notable pessimism in the manufacturing sector. Input prices continued to increase strongly, but output prices increased at the slowest rate since August 2021 due to weak demand conditions.
According to flash data, the US PMI manufacturing index declined to a 30-month low of 47.6 for November from 50.4 previously and below consensus forecasts of 50.0.
The services-sector index also retreated to a 3-month low of 46.1 from 47.8 and below expectations of 47.9.
Excluding the initial pandemic period, there was the sharpest decline in new orders since 2009. There was a significant easing of inflation pressures with output prices increasing at the slowest rate for just over two years.
Minutes from November’s Federal Reserve meeting recorded that a substantial majority of policymakers agreed that it would likely be appropriate to slow the pace of rate hikes soon. Some members also expressed concerns over the risk to financial stability if the central bank pushed ahead with strong rate increases.
Although there were concerns over inflation trends, markets considered the overall tone slightly more dovish than expected.
The weaker US PMI data was important in increasing reservations over the US economy while the European data provided an element of relief.
Fed minutes supported the narrative of a slower pace of rate hikes and the dollar posted notable losses to weekly lows.
The UK Supreme Court ruled that the Scottish Parliament did not have the authority to hold a second independence referendum without the approval of the Westminster government. Although the long-term situation remains unresolved, there is no real prospect that SNP plans for a referendum next year will go ahead.
There will be a US market holiday on Thursday which will be significant in curbing trading volumes and undermining liquidity.
The Euro was resilient after the latest Euro-Zone data with some relief that a steeper downturn was avoided. European currencies overall gained net support as the US currency faded. Overall risk trends were little changed during the day with a solid tone. Lower yields undermined the dollar during the day. EUR/USD found support just below 1.0300 and advanced to highs above 1.0380 in Europe with further gains to near 1.0450 on Friday and close to 4-month highs.
Lower yields were important in undermining the dollar against the yen. USD/JPY dipped sharply to below 140.00 in Europe. USD/JPY dipped further to lows around 138.60 on Thursday and a recovery faded quickly.
The Swiss franc was underpinned by concerns over the global economy. EUR/CHF dipped below 0.9800 before stabilising with USD/CHF losses to just below 0.9400.
There was an element of relief from the UK business confidence data. The Supreme Court ruling against Indyref 2 also underpinned the UK currency. Solid risk conditions continued to underpin the Pound. GBP/USD surged with a break above 1.2000 triggering further gains and hit 3-month highs just above 1.2100.
Commodity currencies were boosted by dollar losses. AUD/USD posted strong gains to above 0.6700 and extended the advance to just above 0.6750 on Thursday.
The Canadian dollar under-performed as oil prices declined again. Bank of Canada Governor Macklem stated that further rate hikes were needed. USD/CAD traded above 1.3400 for most of the day before a retreat to 1.3350 as the US currency retreated.
EUR/SEK traded around 10.87 ahead of the Riksbank policy decision with consensus forecasts for a 75 bas-point rate hike to 2.50%.