Equity market weakness helped the US dollar eke out modest gains. News that a major US bank might have to write-down about $3 billion in derivatives should these be forced to move to an exchange rattled investor confidence and sent stocks into a tailspin. In broad terms, US equities managed to close the day flat after being up more than 0.6% early on.

In terms of economic releases, the Fed Beige Book suggested caution on the economy is still warranted. Most importantly, the Fed noted a deteriorating commercial real estate sector, still-weak employment landscape and home prices that were flat to declining in most sectors for the period through late November. The market looks to have been priced for a rosier outlook.

The US dollar rallied a modest 0.3% on the day against the majors as the negative correlation between risky assets and the buck remained intact. EUR/USD knifed down from a 1.5090 session open towards the 1.5040/45 zone ahead of the close. Below 1.5000 should open up significant short-term weakness as there are likely sizeable stops below.

The Canadian dollar weakened discernibly as oil prices declined on the back of a surprise inventory build. Weekly oil inventories jumped by two million barrels while the market was expecting a small draw. This elicited a sharp decline in oil and commensurate drop in the Canadian dollar. USD/CAD jumped from a NY open by 1.0450 towards the 1.0510 zone at last look.

Gold (surprise!) printed a new record high just above the $1217 area. There is little in the way of resistance now until an hourly trendline by $1235. Seasonal patterns, meanwhile, suggest a constructive outlook for the precious metal into year-end, targeting $1300.