TRADERS´ Blogs

Data/Event Risks

• USD: Fiscal cliff discussions recommence this week – progress (or lack of) will be a key determinant of dollar direction. Tomorrow is hectic for data releases, including durable goods orders,  Case-Shiller house prices and consumer confidence. 
• GBP: Not much out today but tomorrow we see if Q3’s 1% GDP increase will be revised. BoE still adopting a wait-and-see on policy.
• EUR: Minor economic news, including Spanish and Irish house prices. Progress in Greek debt discussions will be critical.

Data/Event Risks

• USD:  This is the ‘bridge’ day that many in US take off after yesterday’s holiday.  Volatility risk mainly from orders (large institutional) pushing market with low liquidity. 
• GBP: Data on lending for house purchase is not a big market-mover, but sterling may be a little more sensitive in low liquidity environment. Lending has been improving of late.
• EUR: The IFO index is the main risk, with weaker number (expected 99.5) making euro vulnerable on fears of more protracted slowdown in Germany.

Data/Event Risks

• USD: Thanksgiving Day holiday – as such, trading conditions will be lighter than usual. Some dollar longs took profits yesterday. Focus next week will return to fiscal cliff discussions.
• GBP: Only CBI Trends up for release today. Otherwise, keep attuned to scatter-gossip re how Whitehall discussions on Autumn Budget Statement are progressing.
• EUR: French preliminary manufacturing and services PMI today, as well as actual German and EC PMI. Focus though will remain on how Europe bridges differences with IMF over Greece.

LDP puts the boot into the yen

Selling pressure on the Japanese yen has intensified over recent days, and for very good reason. Indeed, it would be surprising if the currency did not weaken further in coming weeks.
The economy is already in a mild recession, which could easily worsen next year. The trade sector, on which Japan has relied for so long, is suffering badly as a result of an overvalued currency, reduced capacity and poor sales – exports fell 6.5% YoY last month, a three-year low. Worryingly, the trade deficit for the year to date is a record JPY 5.3trln, with little prospect of any real improvement any time soon. Corporate Japan is haemorrhaging, with some of the biggest names experiencing a fundamental and sustained downshift in demand for their products. Clearly, the deterioration on the trade side accounts for a significant structural shift in underlying demand for the Japanese currency.

Greek breaking point approaches

Given the divisions that were evident between Greece and the IMF last week, we should not be that surprised that they failed to reach agreement yesterday on the latest hole in the budget. This boils down to the simple fact that the IMF does not like, and is not allowed to, lend to a nation unless its debt is on a sustainable footing.  EU leaders are trying every which way to try and find some middle ground on which to meet IMF, but the IMF is moving very little from its entrenched position.

Data/Event Risks

• USD: Plenty of economic news today, including jobless claims, Markit preliminary PMI, Bloomberg consumer comfort and University of Michigan confidence.
• GBP: MPC Minutes will (as usual) be closely scrutinised, but on this occasion unlikely to be market-moving.

 Holding up

Once again the single currency is notable for its relative resilience in the face of more disappointing news overnight and ahead of today’s meeting on Greece.  The wobble from the downgrade of France by Moody’s that was seen at the start of the Asia session has largely been unwound, EUR/USD back above the 1.28 level. For now, markets are not finding reason to build on the rally of yesterday (stocks up 2% in the US) but equally are not willing to take a more bearish stance.

Data/Event Risks

• USD: Housing Starts data not a major event risk, but stronger data (as seen with yesterday’s housing data) could support better tone to risk.
• EUR: Finance ministers meet on Greece deciding on next bailout payment and further short-fall in funding from relaxation of last week’s targets. Risk for late session volatility, especially given divisions with the IMF.

The new political troika

What is notable right now in FX markets is just how much the fate of the majors (USD, JPY & EUR) is tied up in near-term political developments. This never makes for the easiest of markets, but does create the potential for greater volatility, as was seen in the yen last week.  On the dollar, it’s the much talked-about fiscal cliff. Sentiment on the issue appears to have solidified a little more over the past few days, which has helped to underpin the better tone to markets, and risk assets in particular. The basis for this remains fragile though, with just positive rhetoric from the President and Treasury Secretary to support confidence. For now, the signs are that we are still in for something of a ride, but the more that time goes by, the greater the likelihood is that we have a sticking plaster which once again delays the longer-term decisions that need to be taken.

Data/Event Risks

• USD: Existing home sales data should not rock the boat. Focus on fiscal cliff negotiations, but no key developments expected today.
• EUR: Headlines on Greece still a risk ahead of finance ministers meeting tomorrow when final details of next loan tranche expected to be agreed.