Broad-based rally in USD pared commodity gains made Wednesday. The dollar surged to 1.434, the highest level in 3 months, as S&P downgrades Greece's credit rating for the second time this year.

Commodities pulled back as strength in the dollar reduced demand. WTI crude oil price retreated to 72.6 after surging to as high as 73.55. Comex gold also dropped to 1136 from 1142.5. Commodity currencies also tumbled. The Australian dollar plunged to 0.887, the lowest level in more than 2 months, while the New Zealand dollar slipped for the 3rd day to 0.71.

After placing Greece's long-term rating on Credit Watch for a week, S&P eventually decided to downgrade it to BBB+ from A-. According to the agency, 'the downgrade reflects our opinion that the measures the Greek authorities have recently announced to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden'. The downgrade also made S&P's rating consistent with that of Fitch which downgraded Greece to BBB+ on December 8. However, they may not be the end of the story. Greece remains in S&P's Credit Watch, suggesting further downgrade is possible.

Risk aversion increased and shifted from higher-yield assets for USD, Japanese and bonds. Stock market also declined. In Asia, the MSCI Asia Pacific Index lost -0.9% as driven by financial companies. Concerning individual indices, China's Shanghai Composite Index lost -2.3% while Japan's Nikkei stock average lost -0.1%.

In Europe, all benchmark indices opened lower. In UK, the FTSE 100 Index slid -1% while both of Germany's DAX and France's CAC 40 fell around -0.8%.

On the macro data front, UK's retail sales surprisingly dropped -0.3% mom in November, following a +0.6% increase a month ago. This was the first monthly decline in 6 months and suggested economic recovery in the country remained choppy.

Later today, Canada will report November's CPI which probably rose +0.3% and +0.8% on monthly and yearly respectively. Over +5% increase in gasoline price in November, as well as potential increase in auto sales price, should have pushed price levels in the nation.

In the US, initial jobless claims probably declined to 466K from 474K in the previous week. Moreover, leading indicators are anticipated to have risen +0.7% in November after an increase of +0.3% a month ago.