Market reaction was limited with political considerations dominating

Risk appetite deteriorated again in Asia on Thursday with sharp losses in equities amid fresh concerns surrounding US-China relations.

US 10-year bond yields declined to fresh 3-month lows and USD/JPY lost ground before some positive Chinese rhetoric triggered a recovery.

European currencies were unable to take advantage of US doubts with political concerns again sapping Sterling and Euro support as the dollar overall held firm.

The Canadian dollar dipped sharply after a more dovish Bank of Canada policy statement with wider commodity-currency losses also a feature.

Oil prices were volatile ahead of the OPEC meeting with net losses as risk appetite faded.

The UK PMI services-sector index declined to 50.4 for November from 52.2 the previous month. The reading was well below consensus forecasts and the weakest for 28 months with only a marginal expansion in activity. Brexit uncertainty was cited as a major factor contributing to weaker growth and reinforced expectations of subdued fourth-quarter GDP growth.

Market reaction was limited with political considerations dominating. As the Brexit debate continued in parliament, there was increased speculation that the UK could end up not leaving the EU which triggered an element of short covering.

There was also evidence that the government was attempting to improve the backstop provision in order to get legislation passed, but there was a negative reaction to the publishing of full legal advice, hardening opposition to the agreement.

There was still no evidence that the government would be able to win the House of Commons vote and Sterling struggled to sustain significant gains as underlying sentiment remained fragile. EUR/GBP closed just above 0.8900 with GBP/USD below 1.2750 and the pair edged towards 1.2700 on Thursday as weaker global risk conditions also eroded support.

Economic Calendar

Expected Previous
13:15 USD US ADP Employment Change 196K 227K
13:35 CAD BoC Gov Poloz Speaks - -
15:00 CAD Ivey PMI (M/M) 59.7 61.8
23:30 USD FOMC member John C. Williams speech - -

*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.