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There were no significant economic data both from the US and from other world regions

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There were no significant economic data both from the US and from other world regions on Monday, so the dollar preserved its dominating positions. Fed Chairman B. Bernanke’s speech contained statements that economic recession is a low possibility, which had been the first positive factor for the dollar. Besides that, the market seems to have reconsidered the US labor report and decided that the released data were not that negative, since they contained positive dynamics. As a result, the greenback grew against the euro and remained neutral against the yen at the end of the first trading session of the week. Today’s news block is not going to bring any significant economic events either, the market is waiting for consumer credit data for October to come out, the index is likely to show a decrease in demand, since negative dynamics is expected here - -1.0 billion dollars after +2.1 billion. Although November IBD/TIPP economic optimism is likely to grow from 46.7 to 48.3. This macro statistics won’t probably influence the market either positively or negatively, because the investors will mainly pay their attention to the news from Europe, which are likely to contain the results of the European finance ministers summit – this event can change the market moods.

EUR

Lucky for the USD, in today's action risk-off trading dominated, mainly as European leaders showed discord in a meeting in Brussels. Belgium and others tried to get Germany to agree to several steps that would try to alleviate the sovereign debt crisis. Germany rejected calls to increase the European Union's 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis, which put the euro under pressure. “Right now I see no need to expand the fund,” Merkel told reporters in Berlin, which one again proves that there is no consensus between the countries of the block. Besides that, one more burning issue was influencing the pound - the spread of a debt crisis. There are more and more talks in the market, that Portugal is going to be the next to get financial aid - like Greece and Ireland the country will probably need huge sums of money. To crown it all, Moody's rating agency downgraded Hungary's govt bond rating, which can’t be considered positive for the euro. The day wasn’t rich in significant economic news – the Eurozone’s Investor Confidence index for December decreased from 14.0 to 9.7, when only a decrease to 13.2 had been expected. Today Germany’s industrial orders index is being released with 1.9% m/m, 18.6% y/y growth after the previous -4.0% m/m, 14.0% y/y. Of most importance for the market, nevertheless, will be the results of finance ministers meeting and Ireland’s 2011 budget vote, which can bring pressures to the euro, because failure to get next year's budget passed would turbo-charge the crisis in Ireland and Europe.

GBP

The British currency found itself under pressure as a result of new emerging fears about the European debt problems. The US labor report results have been examined and revised by the market as not bad, so the euro ended up loosing against the dollar at the end of Monday’s trading sessions. There was no significant news, released in Great Britain. The expected increase in jobs is, without a doubt, a positive factor for the labor market since the government is going to cut down about 330 thousand employees from the public sector within the next 4 years. Today’s news block is likely to be rich in economic news – BRC retail sales index for November is being released with growth slowdown from 0.8% y/y to 0.7% y/y, October manufacturing production is expected to grow by +0.3% m/m, +5.4% y/y after the previous +0.1% m/m+4.8% y/y, as well as industrial production, which is likely to increase by +0.3% m/m +3.9% y/y after the later +0.4% m/m, +3.8% y/y. In other words, economic data seem to be rather positive, so the sterling has all chances to grow.

JPY

The yen was under pressure only at the beginning of Monday’s trading before Bernanke’s speech. Later on, Japan’s currency pared its losses since the US high-yielding bonds continued to decreased in value, so the yen closed the session winning against the dollar, though the profit wasn’t that big. Economic data released today have already showed a decrease in leading economic indicators from 98.6 to 97.2 in October and coincident indicators index from 102.1 to 100.7 against the expected 97.6, 100.8 respectively. As for the yen’s outlook, the currency has all chances to continue its growth – Japan’s Finance Minister has delivered his speech today, where he mentioned possible yen’s growth, but didn’t say anything about the government’s intervention to change the situation in the markets.

Analysis by: Forex4you.com written by Joaquin Monfort
Forex4you analyst

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