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Forex: Commodity concerns

This week commences on a soft note for European indices following a good month that saw the best weekly performance from global stocks in just over a month. Increased security tensions across Europe and a continued downward spiral of commodity prices means we’re going to see a softer open for equity markets this morning and sentiment is likely to be tested further with a very quiet week ahead on both the economic and corporate data front, culminating in the two day Thanksgiving celebrations in the US.

Markets are being pulled by big forces in different directions with some investors seeing the expected extension to monetary easing from the ECB next week to provide further impetus for equity markets, meanwhile the prospect of tightening from the Fed next month at a time of slowing global growth, as evidenced by weaker commodities, is a reason to be more bearish. This continues to put downward pressure on EURUSD which is lower this morning at 1.0620 having already tested the 1.0600 level. Eurozone services and manufacturing PMIs this morning will be watched closely and then this afternoon there’s US manufacturing PMI and home sales data which could help the dollar in its next leg higher.

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