Much stronger than expected US ADP private sector payrolls and the upward revision to last month’s report provided more evidence of an improving global economy that has had a significant impact on trading across many markets today. Stock indices and currencies are trading down once again continuing their early December slump. The rapidly improving job market in the US has increased the probability that the Fed’s liquidity party may be coming to an end. While March remains the most likely date for a start to tapering, the increasing possibility of a December taper apparently has some traders not wanting to get caught out on a limb and paring back positions. In the days to come, keep an eye on US budget negotiations, a resolution could give the Fed cover to act sooner than later. The selloff moderated a bit after the Beige book regional economic report called the recovery “modest to moderate”, cooling tapering enthusiasm a bit. Meanwhile, commodities have started to react positively to good news as an accelerating global economy improves the prospects for resource demand. US crude is up another 1.2% today on a big drop in US inventories, while Dr. Copper has posted nearly a 2.0% gain. Rallying commodities have helped to cool deflation fears, sparking rallies in gold and silver. So far the precious metals gains appear to be technical bounces easing oversold conditions, but this could change if commodities climb and increase inflation expectations. Positive sentiment toward resource has net carried through to resource currencies, however. AUD has been slammed again overnight with NZD falling in sympathy in the wake of yesterday’s softer than expected GDP report and sluggish Australian service PMI overnight. NOK has been sliding along with Brent crude oil. CAD is not off quite as much as the others but has been dragging its feet after the Bank of Canada held interest rates but expressed concern about soft price inflation which could prompt it to ease policy in future if not rectified. There is another active day for news coming up. The main events are the Bank of England and ECB meetings where traders will be looking to see if the BoE continues its trend toward hawkishness and if it gives any signals if the strong UK economy will encourage it to take its foot off the gas sooner than currently thought. Traders may look to the ECB for indications of any plans for additional rate moves or if it plays to undertake any actions beyond its recent interest rate cut. There also is another battery of announcements due from the US. Jobless claims could attract attention ahead of Friday’s nonfarm payrolls report while the first US GDP revision may also pick up some attention. Economic News Highlights of overnight announcements include: US ADP payrolls 215K vs street 170K. Previous revised up to 184K from 130K US trade balance ($40.6B) vs street ($40.0B) United States non-manu PMI 53.9 vs street 55.0 vs previous 55.4 US new home sales 444K vs street 429K US crude oil inventories (5.5 mmbbls) vs street (0.5 mmbbls) US gasoline inventories 1.8 mmbbls vs street 1.25 mmbbls Canada interest rate 1.00% no change as expected Canada trade balance $0.1B vs street ($0.7B) Eurozone GDP (0.4%) as expected Eurozone retail sales (0.1%) vs street 1.0% Poland interest rate 2.50% no change as expected Service PMI: Australia 48.9 vs previous 48.8 Spain 51.5 vs street 49.7 Italy 47.2 vs street 50.4 France 48.0 vs street 48.8 Germany 55.7 vs street 54.5 Eurozone 51.2 vs street 50.9 UK 60.0 vs street 62.0 Brazil 52.3 vs previous 52.1 Upcoming significant announcements include: 10:00 am AEST South Korea GDP previous 3.3% 11:30 am AEST Australia trade balance street ($350M) 9:00 am GMT Norway interest rate 1.50% no change expected 12:00 pm GMT UK interest rate and QE 0.50% and £375B no change expected 12:45 pm GMT ECB interest and deposit rate 0.25% and 0.00% no change expected 7:30 am EST US Challenger layoffs 8:30 am EST US jobless claims street 321K 8:30 am EST US GDP street 3.0% vs previous 2.8% 8:30 am EST US Core PCE inflation street 1.4% 10:00 am EST Canada PMI street 59.5 vs previous 62.8 10:00 am EST US factory orders street (1.0%) 10:30 am EST US natural gas storage street (145 BCF)

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