- US Dollar recoils ahead of US current account deficit
- Quiet data week in prospect with notable exceptions
Well it’s only a little pot
with ashes in it but the Aussie cricketers clearly wanted it more than
our boys did and we lost the third test and the Ashes series in spite
of a spirited final knock from Captain Flintoff. And like Freddie, the
US Dollar finally found some form following better than expected retail
sales numbers on Friday. This week will be a little hard to forecast
with fewer traders at their desks each day and therefore a less liquid
market for the rest of us. Lower volume generally brings higher
volatility and I can honestly say that in all the years I have been
involved in foreign exchange (far too many to mention without making my
mum feeling old) I have never known a calm December market. This week
will revolve around US economic growth (GDP) numbers, personal
consumption and expenditure numbers also from the States (a favourite
of the US Federal Reserve) and from the UK, the focus is on the minutes
from the
last Bank of England meeting. There is a smattering of business
sentiment and business expectation data from the Eurozone as well and
we are still watching the Bank of Japan for hints on their interest
rate intentions which impact upon other currencies on a funds flow
basis. Of course everyone in the UK will be on wind down so I hope
yours is an enjoyable, fruitful, mince pie-full and chocolate-full week.
The US Dollar is, as
mentioned above, a tad stronger this morning than it was on Friday
morning. Friday’s US data was mixed but traders seemed to pick up upon
the sharp upturn in retail sales reported earlier in the week and the
fact that America attracted increased inward investment during the
previous month. The drop to just 2.0 percent inflation and a
disappointing showing on the industrial production numbers were largely
ignored. I guess that isn’t surprising when the US Dollar has been so
comprehensively sold off in the previous months on the conviction that
the US economy was falling off a cliff; news that the cliff is actually
just a downward slope was bound to be greeted with pleasant surprise
and a little US Dollar repurchasing. Today brings the US current
account balance which is expected to have widened a little (isn’t it
cool that I can refer to seven billion dollars as ‘a little’) and this
is the start
of one of the most volatile periods of the year on a historical basis.
The average range of trade in the past three years on GBPUSD has been
seven cents. If I may grossly misquote an age old carol, ‘tis the
season to place orders. Fa la la la lah etc’ Limit orders are made for
the Christmas period and everyone should be able to start the New Year
a tad wealthier if they use this fortnight to their advantage.
The Sterling – Euro exchange
rate looks like a rabbit in headlights compared to some others in the
market. The expectations of higher Eurozone interest rates and the
‘yeah but no but yeah but’ uncertainty over the Bank of England’s
thinking on UK interest rates have kept GBPEUR nervously narrow in its
trading range. Nevertheless, this exchange rate is at the top of its
range and at one of the most attractive levels for UK based Eurozone
property buyers for two months as traders start to price in another
interest arte hike from the Bank of England after strong UK inflation
numbers were released last week. Sterling is bouncing against a 6 year
high on a trade weighted index and that can’t be a bad time to be
buying Euros. This week will be volatile. I know I keep reiterating
that but it is worth watching your requirements closely and because,
after weeks of increases in the GBPEUR exchange rate, downward
volatility
is the most probably outcome.
The truth is that existence
wants your life to become a festival...because when you are unhappy,
you also throw unhappiness all around.
Bhagwan Shree Rajneesh
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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