The currency blog

As we enter the last full trading day of the year, the greenback trades below 1.59. Yesterday’s US consumer confidence showed a figure of 52.90 against an expected 53.0, but still up on November’s figure of 50.6. On the back of this data the dollar moved over 1.60 but shifted back towards 1.59 levels soon after as thin market trading continued.

German consumer price index figures released yesterday afternoon added support to the euro as we saw an increase to 0.8% from an expected 0.7%, up on last years 0.3% and euro/gbp fell below 1.11 where it is trading this morning.

Today we have very little data for release, with the exception of  Chicago Purchasing Managers’ Index (Dec)  and Swiss Leading Indicator (DEC).

The markets have today re-opened after the Christmas break with little to report. EUR/USD is attempting to push back up over 1.44 and sustain this level, with cable struggling to hold above 1.60. USD/CAD has hit a 2 month low of  1.0373.

European data released this morning showed that French Gross domestic product remained at 0.3% (QoQ), as a result the euro did not budge.
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Markets get more and more illiquid and technicals become more and more relevant. To that end, Euro/Dollar remains the driver for forex markets and the target is very much the 200 day moving average level of just below 1.4200. Given the current penchant for buying Dollars, this looks a better than evens bet today. The turn in the dollar to date comes from a better relative economic performance than other majors, rather than any concern that the global recovery will derailed. As such, we should not necessarily be seeing weakness in high yield commodity and emerging currencies. Certainly the renewed strength in the dollar may be discouraging funding carry trades out of the dollar, and renewing the case for funding out of the JPY or even the EUR, but it suggests a broad carry trade unwind is unlikely to last. The recent improvement in the US Dollar against other major currencies reflects the relative rise in US bond yields. The EUR/USD has slid in December as the Euro yield advantage on 2-year government bonds has slipped from 0.62% in late Nov to 0.28% today - a move that MUST reverse going into 2010.Going back to recent US economic performance, the reported strength in the existing home sales supports the view that things are on the up. December has been a pretty good month for the US on the whole. Although recent manufacturing indicators have proved mixed, November payrolls were a big boost for sentiment. The significant trade balance improvement reported for October and strong Nov retail sales were also confidence boosts. It all leaves the market wanting Dollars as we career towards the end of the year. 2010 should prove a different kettle of fish however and I still look for Euro/Dollar to be nearer 1.50 than 1.40 by the end of the 1st Qtr.
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Llegan las primeras indemnizaciones por el retrasoenel inicio de la obra.

Los hechos a los que se refiere el auto atañen a unos ciudadanos británicos que compraron una vivienda en la Promoción Valle Romano de Estepona. Los inmuebles, que se ofrecían a través de un intermediario a socios y empleados de clubes de la liga de fútbol británica, sufrieron un retraso de 12 meses en el iniciodesusobras,aunque,según Lexland, “no es necesario que la demora sea tan extensa para poder iniciar el proceso”.

Mas informacion, visite la pagina de Lexland: http://www.lexland.es/castellano/images/EXPANSION_261009_Garantias_de_la_ley_ejecutables_por_demora_inicio_obra.pdf

The markets remain very illiquid but reasonably volatile. Equities had a strong day with oil perking up ahead of expected positive revisions to today’s GDP numbers from the US and the UK. In fact the UK GDP came in lower than forecast at -0.2%- this disappointed the markets and sterling fell against the major currencies and briefly dipped under the key 1.60 level against the USD. The US figure should not be much different from the previous estimate of +2.8% leaving the afternoon session very subdued.
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The warnings reflect that the Banks in their respective domains are likely to need to report further write-downs and should therefore raise additional capital while the ‘going is good’. On the back of an already weak Euro, this caused a further dip in its value on opening this morning. Tough talk from ECB member Nowotny didn’t alleviate any European concerns. Having just sorted out problems in a few Banks in his own native Austria, he was less than accommodative in his remarks about indebted nations within the Eurozone. He said that there will be no carte-blanche bail-out of countries suffering beneath the burden of massive borrowings with his comments assumed to be directed towards Greece and its ever increasing problems. His policy view though was very dovish, saying that there was no need to raise interest rates and that Governments shouldn’t be looking to exit banking support measures. Euro/Dollar though, dipped to 1.4280 on market opening and after bouncing, revisited this level again in early London trade. The next real support for the Euro looks to be at the current 200 day moving average, which is presently at about 1.4170, and with the SNB still sniffing around in Euro/Swiss at levels below 1.5000, it might be that this will be a move too far and that we will see a bounce for year end.
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