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Forex News Top Stories Forex Market Outlook 12/22/11

As we near the upcoming holidays and the abbreviated market schedule, the forex market is falling back to its predictable ranges.  Yesterday’s news of the ECB bank lending program is still being digested and while the overall impact is still largely unknown, I can’t imagine that banks in Europe were better off without the program so by default this was a positive development.

Yet the market gurus continue to pour over the “what if” scenarios and fear of the unknown has created uncertainty, which the market hates worse than bad news.  So yesterday’s sell-off that started in the Euro session abated in the US market and allowed the Asian session to follow through and rally to the upside last night.

Markets have since given back some of those gains as there has been little news out of the Euro zone this morning, though Italy is holding a confidence vote in their Senate about the austerity measures, and a joint speech will be given by Draghi and King after a meeting of the European Systemic Risk Board in Frankfurt today.

There was slightly better than expected news out of the UK as the final GDP revision showed at quarterly gain of .6% vs. an expected .5%, though the YoY number came in as expected at .5%.  While yesterday’s release of the rate policy meeting minutes showed the possibility for continued bond purchases, an increase does not appear to be need on the immediate horizon.  The data in the UK has been largely better than expected and the resiliency of the UK economy is starting to emerge.

Yesterday in New Zealand, the GDP was not as positive as in the UK as the quarterly figure came in better than expected at.8% vs. .6%, but the YoY figure missed the 2.2% expectation coming in at 1.9%.  The temporary economic gains were attributed to the hosting of the Rugby World Cup so this accounts for the discrepancy between the quarterly and year-over-year numbers.  The Kiwi traded lower but has since rebounded with risk appetite.

And we are seeing risk appetite this morning before the start of the US session as we have an action-packed morning of data as the holiday shortened trading sessions into the end of the year have squeezed the releases into fewer days.

Later this morning we will get: GDP figures, initial jobless claims, personal consumption, Michigan consumer confidence, and leading indicators.   While the data has been largely positive over the past month, keep an eye on the initial jobless claims figures, which came in much better than expected last week at 366K.  This was a big jump from the usual 400K we had been seeing for what seemed like forever, so it will be interesting to see if this is the start of a new trend of if that number was a “one-off”.  The expectation for this morning is for 378K.

Yesterday’s retail sales figures in Canada came in much better than expected and combined with higher oil prices have helped the Loonie to rally vs. USD to near 1.02.  Check out my chart of the day from last week for a technical discussion of the Loonie.

**Just in** US GDP figures came in worse than expected at 1.8% vs. an expected 2%, but initial jobless claims came in better than expected printing 364K vs. the 378K expectation.  Personal consumption came in lower than expected at 1.7% vs. an expectation of 2.3%.

This news is mostly a wash to slightly negative, with futures giving back some early market gains.  It will be interesting to see if US markets can stay positive today or if early risk aversion ahead of the holiday break takes place.

My guess is that we continue to hold and trade the range so my trading will be short-term as it has been of late.  There is nothing out there at this point that would cause me to think anything different from any other recent day.  The markets are likely in cruise control mode until the end of the year, though don’t count out end of the year window dressing to give the markets an upward bias.