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Relief rally supports additional market gains

Markets look set to extend gains for a second day after President Donald Trump ruled out the use of force and retreated from threats to seize Greenland through economic coercion. The dollar is firmer, yields are steadier, and stock futures are pointing to a stronger open as a relief rally plays out across asset classes. Measures of implied volatility in Treasury, equity, and foreign exchange markets are all coming down as investors reduce protection against tail exposures, and risk-sensitive currencies like the Australian and Canadian dollars are outperforming their safe-haven brethren. Late yesterday, Trump said he would not proceed with...

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Fundamental drivers reassert themselves in currency markets

Good morning. After a series of early-week distractions, currency market drivers are shifting back toward economic fundamentals today, with mixed US data keeping yields within tight ranges and the Japanese yen becoming a key focal point ahead of a potential snap election. Equity futures are setting up for a negative open after modest losses in yesterday’s session, Treasury yields are holding firm across the curve, and the dollar is trading almost imperceptibly lower against a basket of its major counterparts. American consumers continued to engage in retail therapy in November. According to figures published by the Census Bureau this morning,...

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Mixed data supports dollar in countdown to tomorrow’s payrolls report

Happy Thursday. The dollar is extending its advance for a third session after yesterday’s data underscored the US economy’s resilience, denting bearish conviction. Most major currency pairs remain rangebound, with the pound, euro and yen all holding broadly neutral technical positions against the greenback. Treasury yields are slightly higher, while equity markets are set to open a bit lower as investors weigh the Trump administration’s latest threats to intervene in the housing and defence sectors. The latest Job Openings and Labor Turnover report delivered more evidence of a cooling in demand for workers, but layoffs remained low and the quits...

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Markets largely shrug off Venezuela risks, safe haven flows rise slightly

Global markets are taking the latest surge in geopolitical risk largely in stride after the United States attacked Venezuela and detained President Nicolás Maduro over the weekend. A mild flight to safety is lifting the dollar, the Japanese yen, and Swiss franc against their risk-sensitive rivals, Treasury yields are down slightly, and both of the major crude benchmarks—Brent and West Texas Intermediate—are trading slightly lower. The Mexican peso is off around 0.7 percent after Donald Trump said the US will have to “do something” about drug shipments from the country. From a mechanical standpoint, the global macro backdrop looks essentially...

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Surprise deceleration in inflation pressures dollar

Underlying consumer price growth slowed dramatically in the US last month, helping support expectations for a more aggressive easing campaign from the Federal Reserve in the new year. According to data published by the Bureau of Labor Statistics this morning—data that skipped the month of October—the core consumer price index rose just 2.6 percent in November over the same period last year, decelerating sharply from September’s 3.0-percent increase. This undershot all estimates among economists polled by the major data providers ahead of the release. On a headline all-items basis, prices climbed 2.7 percent year-over-year, also slowing from the 3.0 percent...

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