http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/us_open/2010/12/28/12-28-10.html
Talking Points
- Swiss Franc: Advances To Fresh Record-High
- British Pound: Continues To Trade Above 200-Day SMA
- Euro: Pares Previous Week’s Decline
- U.S. Dollar:Consumer Confidence, Richmond Fed Index on Tap
The U.S. dollar weakened against all of its major counterparts on Tuesday, and the greenback may face increased headwinds throughout the holiday trade as investors continue to look for an alternative to the reserve currency. The EUR/USD rallied to a high of 1.3273 during the overnight trade, but the near-term rally is likely to be short-lived as European policy makers maintain a cautious outlook for the region. European Central Bank board member Yves Mersch, who also heads Luxembourg’s central bank, said that the region faces a “dark future” as government takes a “relaxed” approach in managing its public finances, and encouraged policy makers to balance the budget as the economic outlook remains clouded with high uncertainty.
At the same time, the USD/CHF slipped to a fresh record-low of 0.9432, but the marked appreciation in the Swiss Franc could reignite speculation for a currency intervention as the Swiss National Bank aims to balance the risks for growth and inflation. In response, the SNB may make another attempt to talk down the recent strength in the local currency as it dampens the outlook for growth and inflation, but comments from the central bank may fail to bear fruit as the franc continues to benefit from its safe-haven status. As market liquidity remains thins ahead of the New Year, the major currencies are likely to face choppy price going into the middle of the week, but fears surrounding the European debt crisis are likely to bear down on market sentiment as policy makers struggle to restore investor confidence.
Meanwhile, the British Pound retraced the previous day’s decline to reach a high of 1.5510 during the European trade, and the exchange rate may continue to pare the drop from the previous week as price action holds above the 200-Day moving average at 1.5396. However, as the GBP/USD struggles to hold above former support around 1.5500, the pound-dollar may hold a narrow range going into the middle of the week, and the exchange rate may chop around throughout the remainder of the year as trade volume remains low during the holiday trade. In turn, we may see a clear directional bias emerge in January as market participation returns to full swing, and speculation surrounding the prospects for future policy could play an increased role in driving price action for the British Pound as we expect the Bank of England to turn increasingly hawkish in 2011.
The greenback weakened across the board on Tuesday, with the USD/JPY slipping to a fresh monthly low of 81.82, but we may see a short-term reversal later today as the economic docket is expected to reinforce an improved outlook for the U.S. Consumer confidence in the world’s largest economy is projected to increase to a seven-month high of 56.3 in December from 54.1 in the previous month, while the Richmond Fed’s manufacturing index is forecasted to advance to 11 from 9 during the same period, which would be the highest reading since August. As the outlook for growth and inflation improves, the data could spark a bullish reaction in the U.S. dollar, but the market may show little reaction to the event risk as liquidity remains thin across the financial market.
Related Articles: Forex Weekly Trading Forecast - 12.27.2010
FX Upcoming
Currency | GMT | EST | Release | Expected | Prior | ||
USD | 14:00 | 09:00 | S&P/Case Schiller Composite 20 (YoY) (OCT) | -0.18% | -0.59% | ||
USD | 14:00 | 09:00 | S&P/Case Schiller 20 City (MoM) (OCT) | -0.6% | -0.8% | ||
USD | 14:00 | 10:00 | S&P Case Schiller Home Price Index (OCT) | -- | 147.49 | ||
USd | 15:00 | 10:00 | Consumer Confidence (DEC) | 56.3 | 54.1 | ||
USD | 15:00 | 10:00 | Richmond Fed Manufacturing Index (DEC) | 11 | 9 | ||
Currency | GMT | Release | Expected | Actual | Comments |
JPY | 23:50 | Household Spending (YoY) (NOV) | 0.3% | -0.4% | Notches up another drop reflecting subdued domestic demand |
JPY | 23:50 | Jobless Rate (NOV) | 5.1% | 5.1% | Holds steady but labour markets looks soft |
JPY | 23:50 | National CPI Ex-Fresh Food (YoY) (NOV) | -0.6% | -0.5% | Contracts for the 21st consecutive month on year |
JPY | 23:50 | National CPI Ex- Food, Energy (YoY) (NOV) | -0.8% | -0.9% | |
JPY | 23:50 | National CPI (YoY) (NOV) | 0.1% | 0.1% | |
JPY | 23:50 | Job to Applicant Ratio (NOV) | 0.57 | 0.57 | Despite modest improvement labour market remains soft. |
JPY | 23:50 | Tokyo CPI Ex- Fresh Food (YoY) (DEC) | -0.4% | -0.4% | Deflation remains well entrenched on the back of subdued domestic demand. |
JPY | 23:50 | Tokyo CPI Ex- Food, Energy (YOY) (DEC) | -0.5% | -0.5% | |
JPY | 23:50 | Tokyo CPI (YOY) (DEC) | 0.1% | -0.2% | |
JPY | 23:50 | Industrial Production (MoM) (NOV) | 0.9% | 1.0% | First monthly rise after 5 straight drops |
JPY | 23:50 | Industrial Production (Yoy) (NOV) | 5.5% | 5.8% | |
JPY | 23:50 | Large Retails Sales (NOV) | -0.3% | 0.2% | Advances for second month. |
JPY | 23:50 | Retail Trade (YoY) (NOV) | 0.4% | 1.3% | Reverses prev. months drops, first gain in 3 months |
JPY | 23:50 | Retail Trade (MoM) (NOV) | 1.1% | 1.9% | |
JPY | 01:30 | Labour Cash Earnings (YoY) (NOV) | 0.6% | -0.2% | 1st contraction in 9 months |
CNY | 01:50 | Leading Index (NOV) | -- | 101.58 | Bounces off 2010 lows in Oct. |
EUR | 06:30 | French GDP (QoQ) (3Q) | 0.4% | 0.3% | Pace falls back from 2yr peak in Q2 |
EUR | 06:30 | French GDP (YoY) (3Q) | 1.8% | 1.7% | Best since Q1 ‘08 |
CHF | 07:00 | UBS Consumption Indicator (NOV) | -- | 1.630 | Lowest since Feb. |
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