Sentiment deteriorated on Tuesday as investors started to question the benefits of the weekend trade truce between USA and China and stocks fell, along with JPY cross. US bond yields also moved sharply lower, while the short-term part of the yield curve is already inverted, implying a possible recession over the next quarters.
Monday was another positive day for global equities and US indices were up 1%, while EU benchmarks surged more than 1% during the US session. However, indices were down notably from overnight highs reached during the Asian session as some profit taking hit the markets in the afternoon.
The EURUSD pair was 0.3% weaker during the US session on Friday and was trading at around 1.1360 as traders sold the shared currency after weaker than expected inflation numbers.
The euro zone's CPI inflation slipped to 2.0% year-on-year in November, down from 2.2% in October. This was broadly expected by economists, but the core inflation gauge slowed as well to 1.0% from 1.1% previously, while analysts had forecast this measure to stay unchanged at 1.1%.
The greenback was trying to erase yesterday's losses and the dollar index edged higher from the intraday low, despite not so positive inflation data from the US.
The core PCE inflation index, which is the favorite way of measuring inflation for the Fed, unexpectedly deteriorated to 1.8% in October, down from 1.9% (revised lower from 2.0%) previously. The normal gauge stayed at 2.0% year-on-year. Slowing inflation can deter the Fed from raising rates, along with other factors such as weakening economic momentum.
The USDJPY pair ticked higher on Wednesday and was trading near the 114 level during the US session as rising stocks and rising yields spurred demand for the USDJPY pair.
The single currency failed to hold intraday gains and dropped 30-40 from daily highs to trade relatively unchanged on the day during the US session, hovering near 1.1350.
It was a volatile day for the Canadian dollar and the Loonie was down 0.5% during the London session, with the USDCAD pair trading at around 1.3250.
The Canadian inflation accelerated further to 2.4% year on year, while core inflation also ticked higher to 1.6% from 1.5% previously. Moreover, retail sales advanced a bit from 0.0% to 0.2%, whilst the ex transportation gauge moved higher to 0.1% from -0.4% previously. Positive data failed to boost the Canadian dollar and it dropped, as previously mentioned.
Stocks worldwide plunged on Tuesday and EU indices were trading at this year's lows, while the US benchmarks dropped closer to October' lows. The DAX index was down 1.2% during the London session, while the SP500 benchmark lost 1.5% shortly after the US opening bell and the Nasdaq was down another 2% to trade at 7-month lows.
Sentiment worsened further on Tuesday as FAANG stocks continued their demise, which dragged the entire stock market down.
Stocks dropped on Monday and the EU indices were 0.5 - 0.7% lower, excluding the FTSE 100 index, which was still 0.25% higher, mainly due to the optimism about the Brexit deal. The US indices opened 0.5% lower and continued to decline during the US session.
The worst sector was semiconductors as NVIDIA cratered another 8% after weak results and lowered guidance and the stock is now down 50% from its October highs. The technology Nasdaq index lost nearly 2% on Monday.
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