Currency Updates:
U.S. Dollar Trading (USD) the Dollar gained against most pairs with the EUR/USD pulling back from 1.3400 and remaining under pressure after ECB Juncker commented the ‘Euro’ was dangerously high. Adding to the caution overnight rating agency Fitch warned both the UK and the US that there rating was a ‘clearly increasingly’ risk that both could lose their AAA rating. Looking ahead, December Industrial Production forecast 0.2% vs. 1.1% previously.
The Euro (EUR) heavy EUR/JPY profit taking yesterday was the main source of EUR/USD weakness but there was mixed other news. Spain’s PM stated he was not expecting to ask the ECB for a formal bailout as yields on Spanish and Italian Bonds have fallen in recent months. EUR/USD broke below 1.3300 on Juncker’s ‘Dangerously high’ Euro comment late in the US session.
The Japanese Yen (JPY) USD/JPY’s free-fall yesterday from Y89.60 to Y88.60 was on the back of Economics Minister Amari comments he was worried about the pace of the Yen selling and that it could lead to inflation in the future. EUR/JPY and GBP/JPY are under heavy profit taking pressure after the 1000 pip rally last month.
The Sterling (GBP) traded in a tight range with support found at 1.6030 before testing 1.6100 later in the US session. We closed roughly unchanged at 1.6060 and we have a mixed outlook with the BOE recently being quote dovish and with Fitch last night warning of the AAA rating we may be store for some USD strength. Looking ahead, EU December CPI forecast at 2.2 vs. 2.2 previously y/y.
Australian Dollar (AUD) the AUD/USD fell sharply to 1.0525 on AUD/JPY selling in Asia before finding support and closing at familiar levels near 1.0560. EUR/AUD is taking advantage of the Euro weakness so far this week falling from 1.2700 to 1.2570. The RBA has less pressure on them to cut given the recent turnaround in China’s economy and the effect this will have on the Australian mining boom. No economic data Wednesday.
Oil & Gold (XAU) Gold popped higher overnight on the back of Platinum which overtook Gold in price hitting $1699oz overnight after a 6 day rally. Oil eased back with the general profit taking feel overnight but remains well supported above $93 a barrel.
