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Forex News Top Stories Forex Market Outlook 12/23/11

Happy Holidays to all as the markets are preparing for a break from the action so volume is likely to be weak today.  Japanese markets are actually closed today, with US markets closed on Monday.  There is still some news that has hit the wire abroad, and we are waiting on some data here in the US.

Markets today are generally drifting higher, though without conviction.  It is likely that today will hold the range regardless of the data released as investors look forward to trying to push this “mini Santa Claus rally” higher next week.  And next week represents the last four trading days of the year so we could see a push higher if we can avoid any major economic disasters.  The fact that politicians are done for the holidays removes one such potential fly in the ointment.

Stocks are higher to start the morning in both Europe and in the US, and oil looks pegged just under $100, with gold holding above $1600.

Overnight in Europe, French PPI data came in higher than expected, though French GDP came in slightly lower than expected.  Europe is currently having the inflation/deflation debate and no one is quite sure what they are experiencing.  Talk from the ECB today revealed that policy makers believe that quantitative easing (QE) should not be a dirty word, especially if Europe starts to see deflation.

Yet oil is higher, money seems to be flowing and I think it is going to be hard to avoid inflation.  I saw a report today that stated that historically, gas prices move $.93 higher on average from the December holidays to the following year’s peak.  This sounds completely negative to me, which means there is less money to be spent on other areas of the economy.  2012 could be a massive economic roller-coaster ride.

In the UK, there really is no debate about inflation—they have it—yet they are still concerned about weakening economic data.  Well the BOE finally got some in the form of a lower index of services figure released earlier this morning.  The monthly figure showed a decline of .7% vs. an expectation of a decline of .1%.  This is significant because services make up some 70% of the UK economy.  So the Pound is slightly lower this morning, but again, currencies are trading in a tight range this morning so not a big deal at this point.

The US dollar has been slightly lower as the correlative effects of higher stocks and mild risk appetite is keeping markets above water so far this morning, but that could change with the release of data here in the US.  We are waiting on personal income and Spending figures, durable goods orders, and new home sales.

North of the border in Canada, GDP figures are expected to post a .1% monthly gain which is lower than last month’s .2%, bringing the YoY number down to 2.7%.  This seems like a low hurdle to clear so we could see a surprise to the upside.

** Just in** US durable goods orders were up 3.8% vs. an expectation of 2%, but the ex transportation figures came in slightly lower than expected at .3% vs. .4%.  However personal spending and personal income figures came in worse than expected, both showing gains of .1%.   Incomes were expected to have risen .4% and spending was expected to have risen .3%.

This is a net negative and stock futures have given back some early gains but are still positive.  I would not be surprised to see markets close unchanged today.

In Canada, monthly GDP came in unchanged vs. an expectation of a gain of .1%.  The YoY number of 2.7% hit the nail on the head.  Perhaps the bar was a little higher than I had previously suspected.

Nevertheless, these figures have had little impact on the forex market, which are likely to remain in a tight range.  I will not be trading today as today is a churn and burn kind of day.

Happy Holidays to all and I’ll be back next Tuesday!