Euro Surges During Holiday Week

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Euro Surges During Holiday Week

Dollar

There was little change in the index of the USD throughout most the US session last Friday as action sits near 79.65. All traders are in a wait and watch mode as US policy makers maintain to work out an agreement that would avert the US from diving into the Fiscal Cliff.

The EUR/USD is 20 pips at 1.3215 as trade was carried out in a tight 20 pip range for the majority of the US trade. The slide on Friday came as most traders were concerned over the health of the Spanish banking system which resurfaced after it was reported Bankia PINK: BNKXF, and its parent, BFA, were given approximately EUR 18-B in bailout cash.

The USD/JPY was -5 pips at 86.05 with trade considering a pointed turnaround off session highs. The pair reached 86.65, but lost its ground in recent action as fiscal cliff fears gather more concentration. Japanese banks are closed ahead of the New Year.

In the USA, the policy makers are working overtime but the deal is still far away though it is hoped that a temporary solution can be reached to avoid the fiscal cliff.

However, in Europe the consumers of France spending edged up 0.2% in November, but retail PMIs show limitation across the continent during this holiday season, as well as in Germany.

 

Euro

The EUR enjoyed yet another week of gains which included the EUR/USD gains during the holiday week, but the EUR could not sustain them, as the US is slowly but surely approaching the fiscal cliff. In view of the New Year, the volume and volatility is likely to rise. The manufacturing and service PMIs and employment figures are the majors of this week.

In France, the overall spending of the consumer edged up 0.2% in November, but retail PMIs show weak spots all through the continent during the holiday season, which includes Germany as well.

 

Yen

The yen declined to its lowest in more than two years against the dollar on Friday, prior to getting support from safe haven buying after there was deadlock on the latest fiscal cliff talks.

The yen was the most actively traded currency for the past few weeks, and unfortunately fell 8 per cent against the USD with effect from mid-November, after the announcement of the general election. Mr. Shinzo Abe, the new Prime Minister of Japan has vowed to fight deflation by weakening the JPY and easing monetary policy of the country.

As the year ends, the yen has fallen 9.8 per cent against the USD.
The yen was also somewhat stronger against the euro, which fell 0.3 per cent to 113.77. Over the year, the yen was down 12.6 per cent against the single currency.

 

Crude Oil

Crude prices declined after gasoline supplies went up to a 9 month high on weaker demand as US President sought an up or down vote on his offer to lengthen tax cuts to avoid a fiscal crisis.

Prices fell soon after the government said that gasoline stockpiles have gone up to 223.1 million barrels last week and distillate inventories gained. The US President met with the lawmakers on Saturday and asked for a temporary plan to avert more than $600 billion in automatic tax increases and spending reductions set to begin in January.

The February delivery of West Texas Intermediate oil fell by 7 cents to settle at $90.80 a barrel on the New York Mercantile Exchange. There were gains in prices by 2.4 percent this week, a third successive advance.

Trading volume for WTI futures contracts was down by 52 % from the 100 day average.