The dollar is currently trading mixed against the majors, it is stronger against the commodity currencies (NZD, AUD, CAD), the GBP, and JPY while weaker against the Scandies and EUR. Deteriorating UK production data weighed on the pound and continued deflation in Switzerland initially put pressure on the franc. EUR/USD rose to its highest levels since April after breaking above the 1.33 resistance level on the back of weaker US trade data and as EU officials discussed financial problems in Cyprus. The pair is currently trading around 1.3340. The JPY remained weak after Japan announced a fiscal stimulus package of ¥10.3 trillion to increase GDP and create jobs.
Trade deficits widen in US and Canada
November trade balance figures were released in the US and in Canada moments ago and both countries posted larger than expected deficits. Canada reported a widening deficit of -1.96B from the prior -0.55B while the US trade deficit widened by 15.8% to -$48.7B (cons. -41.3B). For the US, this is the widest trade gap since April and the biggest non-oil US trade gap since 2007. This occurred as imports of consumer goods jumped to a record high. The December import price index was also released and unexpectedly fell by -0.1% m/m (cons. +0.1%) while the y/y change was a decline of -1.5% as expected.
UK production disappoints
UK November industrial and manufacturing production disappointed with yearly declines of -2.4% (cons. -1.*%) and -2.1% (cons. -1.3%) respectively. On a monthly change, industrial production grew by just 0.3% in November (cons. 0.8%) while manufacturing production unexpectedly fell by -0.3% (cons. +0.5%). The data weighed on the pound, which fell to its lowest level against the euro since April. GBP/USD is trading lower today but found near term support around the 1.61 figure. Below this, the 55- and 100-day simple moving averages (SMA’s) converge around 1.6060/65 as the next level of technical support.
Swiss deflation persists
Swiss consumer prices experienced a larger than expected drop in December with CPI showing a m/m decline of -0.2% and yearly change of -0.4%. The data underscored ongoing deflation in Switzerland and reinforced the view that monetary policy should remain very accommodative.
Philadelphia Fed President Plosser (non-voter) is scheduled to speak shortly and the NIESR UK GDP estimate for December is due at the top of the hour.
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Recommended Content
Editors’ Picks
AUD/USD retargets the 0.6600 barrier and above
AUD/USD extended its positive streak for the sixth session in a row at the beginning of the week, managing to retest the transitory 100-day SMA near 0.6580 on the back of the solid performance of the commodity complex.
EUR/USD finds support near 1.0720 after slow grind on Monday
EUR/USD jostled on Monday, settling near 1.0720 after churning in a tight but lopsided range as markets settled in for the wait US Fed outing. Investors broadly expect US rates to hold steady this week, but traders will look for an uptick in Fed guidance for when rate cuts could be coming.
Gold advances for a third consecutive day
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Will Bitcoin ignore major macro market developments this week?
Bitcoin price will be an interesting watch this week, with increased volatility expected amid crucial events lined up in the macro market. On Tuesday, Hong Kong will be debuting its BTC and ETH ETFs while the next day will see FOMC minutes make headlines.
Gearing up for a busy week: It typically doesn’t get any bigger than this
Attention this week is fixated on the Federal Reserve's policy announcement scheduled for Wednesday. While the US central bank is widely expected to remain on hold, traders will be eager to discern any signals from the Fed regarding the possibility of future interest-rate cuts.