Data/Event Risks
- EUR: Other than French and Italian industrial production, not a lot to get excited about today. ZEW tomorrow might generate a little more enthusiasm. FX market warming to the likelihood of an ECB rate cut soon.
- GBP: Nothing on the agenda until RICS house prices are released at midnight.
- USD: Fiscal cliff discussions the only real potential mover in the next couple of days given the absence of economic news.
Idea of the Day
Both investors and traders are in a holding pattern awaiting developments in Washington regarding the fiscal cliff. Some signs have emerged in recent days that Republicans might be prepared to accept higher taxes on the rich, which from the Democrats’ perspective is key. USD has been more solid in recent days, helped by payrolls on Friday. Euro looks less secure, would not surprise to see further downside in coming days.
Latest FX News
- EUR: The combination of a respectable US payrolls report and the Bundesbank’s downbeat prognosis for the German economy weighed heavily on the euro for a time on Friday. In addition, there was growing talk that the ECB might be lowering the refi rate before too long. Greece appears to have succeeded with its debt buyback, while Berlusconi is back in Italian politics (was he ever really gone?).
- YEN: Payrolls strength propelled USD/JPY up to near 83, but was met by a wall of sellers. Also, traders were concerned by what Boehner might say on the fiscal cliff at his afternoon press conference. Japan technically back in recession.
- GOLD: Took a knock down to USD 1,685 not long after payrolls, but soon bounced back above USD 1,700. Has been very volatile lately – seeing more flows than the major currencies right now.
- AUD: Yet another very solid performance on Friday and again overnight; it hardly blinked while the dollar was moving higher after payrolls. Technically it looks in good shape. Hard to see what will prevent higher levels in the short term.
- CNY: A mixed picture emerges of the state of the Chinese economy after the data deluge of recent days. Both industrial production and retail sales were above expectations, but unemployment is climbing and exports were very soft. Re-emphasises the need for China’s leadership to accelerate reform push.
