Thin trading and thick data diary ahead
US budget wrangle continues but keep calm and carry on
Sterling set for barrage of UK data
FX Market Overview
We’ve got the tree up so it now smells of Christmas as well. I hope your plans are progressing well and you have no reason to suspect you might be on Santa’s naughty list. Bradley Wiggins got an early Christmas pressie when he won the Sports Personality of the Year award last night. To be fair, in a room full of successful athletes, cyclists, rowers, shooters, et al, anyone could have been nominated and won. My favourite sports personalities were Chris Hoy’s mum, Oscar Pistorius’s dad and Laura Trott; for no more than their sheer exuberance. What I found hilarious in the papers this morning was the sudden realisation that Jess Ennis has a nice bottom. The woman runs around in gym knickers all year and they only spot her derriere when she puts on a form fitting dress. Really odd.
Christmas is starting to dawn on traders judging by the slowdown in volumes. Friday was a rather quiet affair with little data and an apparent lack of willingness amongst traders to get in amongst it. That doesn’t mean the markets will be flat until the end of the year though. With fewer traders in action, smaller than normal transaction sizes can have a marked effect on any exchange rate; hence this time of year can be very volatile. Many businesses too will be finalising this year’s requirements over the coming days so I predict a pretty lively week.
Adding to that liveliness will be the ongoing bartering over the shape and state of the US budget. We are constantly being told that there is no reason to be concerned but the markets clearly are worried and that is reflected in the weakness of the US Dollar. We get another calculation of US economic growth on Thursday and that could conceivable show an upward revision after Friday’s very positive US industrial production data and a surprisingly strong purchasing managers index. Expect further USD weakness if that is the case.
Europe’s data continues to be mixed. The Eurozone purchasing managers index was rather upbeat as Germany appears to have returned to growth but Ratings agency Fitch says there is a more than 50% chance France will loves its AAA rating.
Sterling had a mixed week but was perhaps slightly weaker by Friday’s close. UK data is still very mixed and the warnings from ratings agencies that Britain could be downgraded haven’t helped the Pound. Tomorrow’s inflation data will be interesting. We also get the Bank of England’s minutes from their last meeting on Wednesday. Whilst no interest rate change was made, there is the outside chance of an expansion of the quantitative easing budget sow e will look at those notes with interest. Friday brings the government borrowing stats as well as the final estimate of UK economic growth for Q3.
The Australasian Dollars which strengthened through the week could fall by the end of the year if the US agrees a budget or at least avoids the ignominy of falling off the so called ‘fiscal cliff’. We get the minutes from the reserve Bank of Australia’s last meeting overnight tonight so it will be interesting to see just how detailed their discussion was about future interest rate adjustments. We also get the NZ business confidence index which, judging by recent data, should be rather upbeat. However, Wednesday night brings the NZ GDP data and that is likely to be rather poor so a volatile week is in the offing for the Kiwi Dollar and overnight orders are highly recommended.
The success of the LDP party in Japan has led to Yen weakness. The party is known for its preference for a weak Yen and wider monetary expansion so hold on to your hats for further cash injections into the Japanese economy and a weaker Yen overall.
Away from the markets of course the news is dominated by the latest slaughter of innocents in an American school. It is hard to read the harrowing details without shedding a tear for the heroism of school staff who were never trained to deal with an armed assault but who appear to have done so with only one thought in their heads; the safety of the children in their care. Most lost their lives in that endeavour; murdered by an insane young man who seems to have been known to have had a personality disorder and yet he had access to obscene amounts of weaponry. Can someone explain to me why anyone in a ‘civilised’ society needs an automatic assault rifle?
The Second Amendment says we have the right to bear arms, not to bear artillery.