US Dollar modestly recovers as markets enter holiday mode

It will be a quiet Asian session in terms of economic data. New Zealand will report Credit Card spending. Later in the day, the UK will release public borrowing data for November. Reports from the US include the weekly Jobless Claims, a new estimate for Q3 GDP, and the Philly Fed. In Canada, Retail Sales are due.

Here is what you need to know on Thursday, December 21:

The US Dollar rose on Wednesday, supported by US economic data and a slight deterioration in market sentiment. The Santa Claus rally took a pause, with Wall Street’s main indexes about to end a five-day positive streak. Treasury yields reached fresh lows. The 10-year yield dropped to 3.86%, reaching the lowest level since July 27.

Data from the US on Wednesday surpassed expectations, with Existing Home Sales rising to an annual rate of 3.82 million, above the market consensus of 3.77 million, thus ending a five-month negative streak. Additionally, CB Consumer Confidence improved from 101.0 to 110.07.

Analysts at Wells Fargo on Existing Home Sales:

Although the 3.82 million unit pace of sales registered during the month is still sluggish by historical standards, November’s modest uptick is the latest sign that housing activity is starting to bounce off the mat as financing costs move lower.

On Thursday, important economic reports are due, including the weekly Jobless Claims, the Philly Fed, and a new estimation of Q3 GDP growth. On Friday, the Core Personal Consumption Expenditure (Core PCE) is due. 

Eurostat reported an improvement in Consumer Confidence in December. European Central Bank (ECB) officials continued to warn that interest rates need to remain at the current level for some time, contrary to market expectations of early rate cuts in 2024. EUR/USD lost ground, but held above the 20-day Simple Moving Average (SMA). The pair is consolidating around 1.0950, showing no clear signs in the short term.

The Pound was among the worst performers after a softer-than-expected inflation reading from the UK. GBP/USD dropped towards the 20-day SMA, standing at 1.2640. The UK will report Public Borrowing data for November.

USD/JPY closed flat around 143.70, stabilizing after volatile days. The Yen remains supported by lower government bond yields.

USD/CAD hit fresh four-month lows at 1.3310 before rebounding towards 1.3350. Canada will report Retail Sales on Thursday, expected to show a 0.8% increase in October.

NZD/USD reached a five-month high slightly below 0.6300 but then turned downside, reaching 0.6250. New Zealand will report Credit Card Spending on Thursday.

Metals exhibited divergent performances. Silver rose, reaching weekly highs at $24.45 but then lost momentum, retracing to $24.15. Gold, on the other hand, declined and fell to the $2,030 support area.

(This story was corrected on December 20 at 20:41 GMT to say that the US Existing Home Sales report was released on Wednesday. A previous version of the story said it was published on Tuesday.)