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USD flat in thin markets

Trading volume and volatility were in short supply on Thursday as the US markets took a public holiday. Those conditions are likely to continue into the dreaded Black Friday as well, as US markets only operate for half the day and few traders bother to get involved; so alluring is the prospect of an air fryer with 40% off. The key themes for the USD amidst this enforced somnolence are a more dovish Federal Reserve and the continued rise of Coronavirus in China. We haven’t seen the fallout from the latter issue yet but that ought to create safe-haven demand for the USD when markets wake up on Monday. China reported a record number of 32,695 cases yesterday and that must worry the countries that supply China with its raw materials. So there should be pressure on the likes of the Aussie and Kiwi dollars as well as the Japanese Yen. The GBPUSD rate starts Black Friday at $1.21, EURUSD is also flat at $1.04. The GBPAUD rate is up to AUD 1.7925 and GBPNZD is back up to Monday’s levels at NZD1.9380.

JPY stronger after highest inflation in 40 years

The Japanese Yen has had a very strong week, culminating in an overnight rise due to the Consumer Price Inflation beating forecasts and hitting 3.6% in November, the highest level since April 1982. That has prompted talk of the first Japanese interest rate hike since 2006 which could get the Bank of Japan’s base rate back to 0%. So the USDJPY rate dropped from JPY142 on Monday to JPY138.65 this morning. The GBPJPY rate is only marginally lower than Wednesday’s highs but the pound has mounted a pretty strong recovery this week.

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