European releases on Friday:
November Forecast Actual
U.K. Industrial Production (MoM) +0.1% - 0.1%
U.K. Industrial Production (YoY) +0.5% +0.4%
U.K. Manufacturing Production (MoM) +0.1% - 0.1%
U.K. Manufacturing Production (YoY) +0.4% +0.1%
Friday had a limited European release schedule which prevented excessive Dollar selling with the Euro still failing to break above the prior Friday’s 1.4823 high and the Swissie below the 1.0975 support.
The Industrial & Manufacturing Production numbers from the U.K. added another nail in the coffin but without igniting the persistent selling we have seen over the past few weeks. The 1.9479 support held very well. The Pound has a fairly busy release schedule this week. Of note this week will be the December PPI on Monday and CPI on Tuesday which is unlikely to provide any comfort for those looking for lower interest rates and should provide a degree of stability over the first half of the week as expectations of lower interest rates will be dashed. However, the end of the week should see some further losses but without excessive new lows, holding above 1.9406-10.
U.S. releases on Friday:
Forecast Actual
November U.S. Trade Balance USD -59.4bn -63.1bn
December U.S. Import Price Index (MoM) +0.0% +0.0%
U.S. Stats were hardly encouraging but saw continued rhetoric providing the main generator of sentiment.
The former Chicago Fed’s President Moskow appears to be expecting another 0.50% cut at the next FOMC meeting at the end of the month in response to the main risk being the now almost assumed recession which should take precedent over inflation. However, he does think the Fed has acted in a timely manner and is “not behind the curce.” Moskow’s comments were almost echoed by Mishkin who highlighted that financial risks are the predominant factor generating downside risk. He pointed out the Fed can always reverse cuts if conditions change. He still pointed out the balance that is required. Cutting rates too quickly could fuel undesirable inflationary threats while not cutting enough accelerates the downside risks. However, as we have seen from recent Fed comments, they feel that inflation is quite well anchored with energy the main source of concern. Well, a 0.50% cut at the next FOMC meeting is pretty much priced into futures and can be argued to be already discounted in current Dollar levels. The beginning of the year has seen a marked reduction in the passion for Dollar selling in spite of the continued overwhelming bearishness. It is possible that medium term sellers have reluctant to sell close to Dollar lows and hence this could provide a continued stand-off until either we see a sufficiently deep enough correction or an even that will force direct follow-through.
Japan is on holiday today which should keep the Asian session quiet while there is also a limited release calendar today in Europe and the States which may well allow the Dollar to drift back higher into ranges.
More later once the daily analysis has been done…
The following economic releases from Asia are due today:
Australia – December
TD Securities Inflation
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