Currency Updates:
U.S. Dollar Trading (USD) initial reactions to the EU Summit in Asia were negative as disunity emerged between the UK and Europe. The European session saw a dramatic reversal of the sentiment and we managed a rally into the close. US Consumer Confidence rose sharply in December to 67.7 vs. 64.1 previously and this added to the positive mood. In US stocks, DJIA +186 points closing at 12184, S&P +20 points closing at 1255 and NASDAQ +50 points closing at 2646.
The Euro (EUR) the initial reaction to the announcement that only the Euro currency 17 would be signing up to a new treaty after UK vetoed caused slight panic in the market but the Europeans reaction was more subdued and they seemed confident the new EU fiscal compact would bring the EU closer together. German also threw cold water on calls for Eurobonds and on ESM getting a banking license and this capped optimism. Bond yields in Italy and Spain initially spiked higher but closed lower. Looking ahead, November German WPI forecast at 0.0% vs. -1% previously.
The Japanese Yen (JPY) the USD/JPY was unmoved remaining within a 25 pip range while all the action was on the Yen crosses. AUD/JPY and EUR/JPY led the market down in late Asian trade as it seemed the EU summit could unravel but then the market reversed sharply with a second look at progress made encouraging European investors. The USD/JPY will be closely watching the FOMC later this week from the US with the Fed expected to be clearer in its monetary policy communications.
The Sterling (GBP) GBP/USD struggled on Friday with the negative fallout from the EU summit in which the UK PM refused to sign up to new reforms. Traders are concerned this could lead to the UK being left out of future negotiations and possible distancing itself from the Eurozone. GBP/USD found support under 1.5600 and is stable waiting for more EU fallout.
The Australian Dollar (AUD) the AUD/USD more volatile than most falling heavily in Asia before reversing and rallying up to 1.0200. Chinese data on Friday was supportive but the EU summit concerns dominated the price action. The chances of more falls will depend on Italian bond yields and stock markets. UPDATE October Trade Balance at 1595 vs. 1900 forecast.
Oil & Gold (XAU) Gold was cautious in a tight trading range supported by the demand for alternative investments but hurt but risk off trade. Oil was able to recover slightly from Thursday’s sell off back above $99 and looking to retest $100.
