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Gold Strengthens on Risk Aversion

Safe Haven Currencies Find Favor Against Riskier Assets

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Markets yesterday were driven by retail sales and sparse economic data from several major economies, much of which was mixed and illustrates that the upwards path of momentum is hard won. The question of December monetary policy remains in the mind of market participants as muted reactions to sideways growth cements itself into sentiment.

US Retail Sales and PPI Decline

Retail sales in the US for the month of October rose 0.10% against forecasts of 0.30% led by a decline in auto sales, while core retail sales for the month increased 0.20% but less than expected 0.40% growth. The producer price index was also weak as the headline print showed a decline of -0.40% falling below the estimates of 0.20% and the core PPI for the month declined -0.30%, below estimates of 0.10%. The weak numbers initially pulled the US Dollar lower, but the Greenback managed to gain after the preliminary University of Michigan consumer sentiment ticked higher from 90.0 to 93.1 in October, beating estimates of 91.3. Inflation expectations eased, rising 2.5% down from 2.7% previously. The equity markets declined -1.18% on Friday for a third straight day, losing nearly -4.14% since the 4th of November highs at 2108.

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New Zealand Retail Sales Rise More Than Expected

Data released late Sunday from New Zealand showed retail sales growing 1.60% for the month of October while the core retail sales, exluding the volatile energy and food, increased 1.00% up from 0.00% last month below 1.40% expectations. Retail sales picked up in most of the categories with spending rising sharply on durable goods and motor vehicle sales along with an increase in spending on food products. The retail sales data painted a mixed picture as far as the RBNZ's monetary policy is concerned, highlighting that inflation remains subdued. Market expectations are for the RBNZ to deliver a 25 point rate cut at the December meeting. The Kiwi initially gained on the release, opening today’s session higher at 0.6550 but soon declined to trade near 0.65280.

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Japanese GDP Contracts for the Second Straight Quarter

Revised quarterly GDP numbers from Japan released earlier today showed the economy contracting -0.20% for the quarter while contracting -0.80% on an annualized basis. The GDP contraction marks a second consecutive quarter of the Japanese economy contracting as investment and inventories continue to drag on the economy. Exports registered an increase of 10.9% in the third quarter. While it is too early to speculate, the markets expect the Bank of Japan to keep its monetary policy on hold when it meets this Thursday. USDJPY opened today’s session at 122.252, gaping lower before managing to post small gains to fill the gap by posting session highs of 122.603.

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Euro Susceptible to Inflation Data and Draghi Speech

Eurozone inflation numbers are due later today with estimates of the headline CPI to have risen 0.10% for the month, a subdued pace, down from 0.20% inflation seen a month ago. On an annualized basis, headline inflation is expected to stay flat at 0.00%, while the core inflation data is expected to rise 1.00%, unchanged from the previous print. The inflation numbers are followed by Mario Draghi's speech who will be speaking at an event in Madrid. The speech could gain prominence and any downside surprises to inflation could potentially see the ECB continue to keep up its dovish narrative. The Euro was weaker against the US Dollar for the most of last week, however the weekly candlestick closed in a small bodied spinning bottom pattern. A weekly bullish close could signal a possible correction to the upside, while a failure to see any gains could keep the Euro subdued to the Dollar.

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