The commodities currency could find strong demand by the year end on increased market expectations of greater demand for them amid the US adopted easing policy which is not expected to be end soon supported by the Chinese decision of lowering its exports of the rare metals. The Canadian dollar has reached parity with the greenback while the Aussi is trading above 1.013 currently. The demand for oil also is widely expected to rise from another side because of the bad cold weather in US, Europe and even in China which watched degrees below -30 this year. The oil is looking targeting 100$ a barrel in the beginning of next year and the market eyes are now at US inventories data after last week decreasing of the crude inventories by 5.3m barrels while they were forecasted to have just 1.1m barrels of declining which is still giving a potential high outlook of the prices. The copper is also at its all times high while the silver is trading above well above 30$ and the gold could get over 1400$ per once supported by the increased inflation outlook from the rising of these commodities and energy prices.
While the Single currency could not find enough buying to exist further above 1.32 versus the greenback which has been hit yesterday by weaker than expected US December Broad Conference Consumers Confidence which 52.5 while it was expected to be 56.1 from 54.1 in November. The pair has been supported earlier this week after breaking above 1.317 versus the greenback finding stop loss triggering in low volume sessions helping taking profit taken but the market sentiment is still looking unchanged toward the single currency.
The Asian stocks also could get back last Tuesday loses supported by increasing of November Japanese industrial productions rising monthly by 1% to be the first time in the recent six months shrugging off the China's decision of hiking the interest rate 25 basis points as it looked pricing in the market right now. The Chinese decision was the second in the recent 3 months after it had requested from its banks to increase their reserve requirements 0.5 percent to be the sixth time this year for curbing the inflation upside risks by capping investment spending cooling the economy with rising of the energy and commodities prices by this year end which is expected to continue with the Fad's keeping of its quantitive easing policies which caused depreciation of the greenback putting China under pressure to cool its economy further which can have a negative impact on their economic growth and exports at the current high prices and also their stocks markets which have lost above 500 points since the middle of last month under the pressure of this policy which can support the Yuan hurting the business spending and this has really helped US trade balance to get better tightening the US trade deficit which came down in October to 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ and this is expected to continue while US is still having an unstable housing market growth yet and weak labor market which can support the Fed keep its monetary policy stance unchanged unfazed of the inflation risks which are still looking tame as we have seen recently US CPI of November coming at .1% monthly while it was expected to be .2% and the core figure excluding the food and energy rising by just .1% as expected after 2 months of flat reading maintaining the Fed's worries about the deflation risks while Chinese inflation came at a 28-month high at 5.1 in November which can open the door for PBOC to take tighter monetary actions for staving off the prices currently which can hurt the global growth rates and effect negatively on the risks appetite supporting the greenback and the gold as a reaction of the US easing policy which has hurt the greenback again by extending the working of the tax cuts which have been taken during Bush's presidency in another way of easing can hurt the US budget and treasuries prices driving the US treasuries yields which china has a great deal of them in the same time.
While the European equities markets are still looking unfazed of this week few events trading very quite with no materialized change of the risk appetite underpinned generally by the gains of the US equities markets with high potential of the commodities and energy prices which can reinforce the mining and the oil companies earning by the end of this year with the ECB keeping of its supporting of the bonds markets lowering the yields giving underpinning the investors' confidence of the investors with the market focusing on the debt crisis but these gains can be always tempered by be the threats of the debt contagion worries putting the European stocks back under pressure and the single currency which has a weaker positions with the market expectations of pumping new funds into countries actually suffering from weak financial position and accumulated deficit like Greece which could have an extension of its loans maturity and also Spain and Portugal which has been downgraded by Fitch one notch to A+ with a negative outlook which can keep it under pressure to be the nearest to take a share from the IMF and the EU bailing out package following Ireland which has been downgraded five notches to B
with a negative outlook from Aa2 by Moody's which has announced that it can downgrade the Spanish long term credit rating of Aa1 too recently which contained the market sentiment weighing negatively on the Euro ignoring the better than expected economic data from Germany which driving the EU economic growth up as we have seen recently the germane IFO business climate recording new historical new high in December at 109.9 since the beginning of it in 1991 after it has made 109.3 in November and the germane retails sales figure of October rising up by 2.3% monthly while it was expected to be up by just 1.3% after falling in September by 1.8% which helped EU consumer confidence getting up to new 3 years high and lead November EU manufacturing PMI index to be above 55 again at 55.3 from 55.5 in October.
God Willing, it is important to wait for US December Chicago PMI to be 61.5 from 62.5 in November tomorrow.
Best Wishes for a Happy New Year
FX Consultant
Walid Salah El Din
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