<p style=““ class=“text-align-justify“>The UK manufacturing sector continues to contract in November, with output, new orders and employment all falling further on the month. Meanwhile, business sentiment also dips to its lowest level since April 2020 as the outlook deteriorates markedly. The only consolation is that inflation pressures are easing a little, with input prices falling to a three-month low. S&P Global notes that:</p><p style=““ class=“text-align-justify“>“November saw a further contraction of the UK manufacturing sector, as weak demand, declining export sales, high energy prices and component shortages all hit industry hard. </p><p style=““ class=“text-align-justify“>“The outlook for the sector also darkened, as confidence among manufacturers fell to its lowest level since April 2020. Weak sentiment and declining intakes of new work led to job losses, a retrenchment in purchasing activity and an accumulation of finished goods inventory that will likely provide a further brake to output during the months ahead. Companies are also reporting rising recession fears, weak consumer spending and subdued client confidence. </p><p style=““ class=“text-align-justify“>“The trend in new export business was especially weak, as Brexit issues and supply chain stresses exacerbated the effects of a weakening global economic backdrop, leading to lower sales from the US, the EU and China. On a slightly more positive note, manufacturers saw a welcome easing in input price <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_2″ class=“terms__main-term“>inflation</a>. However, firms are still reporting that the direct and indirect impacts of high energy prices remain a major concern.”</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Football’s coming home.. England’s progress to the RO16 in Qatar is certainly helping to lift the mood. I kid.</p><p style=““ class=“text-align-justify“>But with the dollar plunge yesterday, it has certainly reinvigorated the pair in a push from below 1.2000 to above 1.2100 today. Since the break higher in November, price action has been caught between its 100-day moving average (red line) and 200-day moving average (blue line). Right now, we are closing in on the latter with a 0.5% move up to 1.2117.</p><p style=““ class=“text-align-justify“>That puts the focus on buyers‘ appetite to chase the next upside leg, with the 200-day moving average at 1.2151 in the crosshairs. Keep below that and sellers will be able to try and stay in the game. But break above, and buyers will have renewed vigour to take a run at the August highs at 1.2276-93 before revisiting 1.2500 potentially.</p><p style=““ class=“text-align-justify“>The timing of the move comes alongside some other key technical moves against the dollar as outlined here:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/usdjpy-stays-under-heavy-pressure-on-falling-yields-20221201/“ target=“_blank“ rel=“follow“>USD/JPY stays under heavy pressure on falling yields</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/eurusd-still-has-some-work-to-do-to-firmly-establish-next-upside-leg-20221201/“ target=“_blank“ rel=“follow“>EUR/USD still has some work to do to firmly establish next upside leg</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/audusd-looks-to-build-on-yesterdays-technical-break-higher-20221201/“ target=“_blank“ rel=“follow“>AUD/USD looks to build on yesterday’s technical break higher</a></li></ul><p style=““ class=“text-align-justify“>And not forgetting, there’s also another key risk event before the week comes to a close, with the US non-farm payrolls tomorrow. That might yet be a key catalyst for any moves before the weekend.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Eurozone manufacturing activity continues to contract further in November, albeit at a slower pace than in October at least. Output and new orders were both seen declining again, while <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a> pressures eased in part due to weaker demand and also reduced strain on suppliers. This is a theme that is seen across all the individual country reports today. S&P Global notes that:</p><p style=““ class=“text-align-justify“>“The PMI signals some welcome moderation in the intensity of the eurozone manufacturing downturn in November, which will support hopes that the region many not be facing a winter downturn as severe as previously anticipated by many. However, the survey’s production index continuing to run at one of the lowest levels recorded over the past decade. At these levels the survey is indicative of a marked annualised rate of contraction of approximately 4%. While official manufacturing data have been more buoyant – and more volatile – in recent months, such weak PMI readings have always been followed by commensurate steep declines in the official statistics. </p><p style=““ class=“text-align-justify“>“There also seems to be no immediate respite in sight for the plight of manufacturers, given that order books continue to deteriorate at a worryingly steep pace, contracting at a far faster rate than firms are cutting production. Inventories of unsold stock are therefore rising further and follow on from the largest build-up of finished goods inventories in the quarter century history of the survey in recent months. Such a stock build-up will inevitably be followed by further production capacity cuts, absent a revival in demand. </p><p style=““ class=“text-align-justify“>“A consequence of the recent inventory build-up and softening of demand has been a major pull-back in purchases of inputs by manufacturers, which has in turn taken pressure off supply chains. Supplier delivery times lengthened in November to the smallest extent since August 2020, and are now even improving in Germany. This improvement in supply is an important signal of a shift from a sellers’ to a buyers’ market, and is hence being accompanied by a significant cooling of industrial price pressures. </p><p style=““ class=“text-align-justify“>“Looking ahead, future output expectations have picked up slightly on improved supply chain and energy market signals, the latter buoyed by warmer than usual autumn weather, but confidence remains amongst the lowest seen over the past decade. How manufacturers fare over the winter months will of course be conditional to a large extent on the weather, with any cold snaps likely to fuel concerns over energy resources and potentially hitting production and supply chains further.”</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Prior +2.2%</li><li>Market index 208.1 vs 209.8 prior</li><li>Purchase index 181.0 vs 174.4 prior</li><li>Refinance index 325.5 vs 373.6 prior</li><li>30-year mortgage rate 6.49% vs 6.67% prior</li></ul><p style=““ class=“text-align-justify“>Mortgage activity declined in the past week but it was a bit of a mixed report with purchases recovering slightly while refinance activity falling sharply. That comes despite another big drop in the average rate of the most popular US home loan, down 18 bps to 6.49%.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Here are some snippets from the latest on the global economy from Citi:</p><ul><li>Global growth to slow to below 2% in 2023</li><li>Sees Fed terminal rate between 5.25% to 5.50%</li><li>Sees 2023 US headline inflation at 4.8%</li><li>Sees US GDP growth of 0.7% next year, China GDP growth of 5.6%</li></ul><p style=““ class=“text-align-justify“>The firm adds that „we see global performance as likely plagued by ‚rolling‘ country-level recessions through the year ahead“, with their forecasts projecting the UK and Eurozone economies to contract by 1.5% and 0.4% respectively in 2023.</p><p style=““ class=“text-align-justify“>As for the slower growth outlook, the firm is citing continued challenges from the pandemic and the Russia-Ukraine conflict, which has led to surging inflation and aggressive policy tightening by major central banks in response.</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Prior +10.6%</li><li>Core CPI +5.0% vs +5.0% y/y expected</li><li>Prior +5.0%</li></ul><p style=““ class=“text-align-justify“>The headline reading may be softer than expected but notice that the core reading remains unchanged from October, holding at a record high. As mentioned <a target=“_blank“ href=“https://www.forexlive.com/news/heres-a-slight-splotch-to-the-softer-spanish-inflation-report-20221129/“ target=“_blank“ rel=“follow“>here</a> yesterday, the softer price pressures are largely to do with a drop in energy costs but we are seeing higher prices be embedded in other areas of the economy and that is reflected by the core reading.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>It doesn’t mean an end to the stringent measures but at least the people are being given alternatives now, rather than be forced to endure community testing regardless. These little steps will add up eventually, in a slow progression towards the re-opening in China.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Risk tones are faring better while Treasury yields are a little lower and that is pinning the dollar down as we get stuck into European morning trade today. It’s going to be tough to look into the moves right now as we have seen them reverse in US trading for two days in a row already this week.</p><p style=““ class=“text-align-justify“>Month-end flows are arguably a factor but here’s a look at the technicals as well to try and understand better the price action today, before we get to Fed chair Powell’s speech later on.</p><p style=““ class=“text-align-justify“>EUR/USD is up 0.5% to 1.0380 but faces key resistance in the form of its 200-day moving average (blue line) at 1.0372 with large option expiries also potentially a factor at 1.0370-80 today. That might keep price action somewhat anchored but again, it is all about looking at the key resistance level above and month-end flows could make it tricky in the session ahead.</p><p style=““ class=“text-align-justify“>Meanwhile, USD/JPY is flattish around 138.68 currently and still playing around the levels mentioned <a target=“_blank“ href=“https://www.forexlive.com/news/usdjpy-hangs-on-in-there-but-only-just-20221130/“ target=“_blank“ rel=“follow“>here</a> earlier.</p><p style=““ class=“text-align-justify“>GBP/USD is up 0.4% to 1.2000 but price action is still very much caught in between its key daily moving averages in the bigger picture:</p><p style=““ class=“text-align-justify“>In the short-term, there is some minor support closer to 1.1950 with resistance sitting up there in the form of its 100-hour moving average at 1.2046 currently.</p><p style=““ class=“text-align-justify“>Elsewhere, USD/CAD is down 0.3% to 1.3530 while AUD/USD is up 0.6% to 0.6730 as risk sentiment holds up. The latter is still facing resistance from its 61.8 Fib retracement level at 0.6767 but at least working its way back above its 100-day moving average (red line) at 0.6685:</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>It’s hard to tell whether or not this is in part some relaxation of stringent measures or just the fact that close contacts of Covid cases under medical observation has surpassed 1 million persons across the country in the past two weeks.</p><p style=““ class=“text-align-justify“>For some context, close contacts in China are typically brought to a „centralised isolation place“ – more often than not, it means a hotel – for about five days before another three days of observation at home.</p><p style=““ class=“text-align-justify“>The change for the southern province of Guangdong is only for close contacts of Covid cases who fulfill certain conditions to quarantine at home. I would assume it means having sufficient room to isolate from other family members within the vicinity.</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Economic confidence 93.7 vs 93.5 expected</li><li>Prior 92.5; revised to 92.7</li><li>Industrial confidence -2.0 vs -0.5 expected</li><li>Prior -1.2</li><li>Services confidence 2.3 vs 2.0 expected</li><li>Prior 1.8; revised to 2.1</li></ul><p style=““ class=“text-align-justify“>That’s a slight improvement in euro area economic sentiment, which is a welcome development ahead of the winter. Slowing inflation pressures have certainly helped and if we do observe milder weather in the coming months, it will help with the optimism. That said, even with all of this, the outlook remains challenging with recession risks continuing to build.</p>

This article was written by Justin Low at forexlive.com.