USD takes losses
The USD which is always considered to be a safe haven took losses on Wednesday after the release of the German business climate figures which was much better than expected. These figures undoubtedly encouraged investors to move their funds to higher yielding assets. The GBP/USD went up more than 30 pips throughout the morning trading on Thursday to reach as high as 1.6297, ahead of a sliding trend which brought the pair to 1.6280 for the duration of the afternoon session. In opposition to the Swiss franc, the USD went down by 35 pips to trade as low as 0.9086. At the end of the European session, the USD/CHF was stable at 0.9099.
At present it is anticipated that the US news is likely to have a considerable effect on USD pairs. It is hoped that investors and traders will pay close attention to the ‘Unemployment Claims’ which will be followed by the ‘Existing Home Sales and Philly Fed Manufacturing Index’. Though there are indications that the total number of people who have filed the unemployment insurance for the first time last week, will go up in the coming days, there are expectations that both the manufacturing figures and home sales will show signs of improvements and consequently, the US economy too. However, any other better than expected news will definitely help the greenback to recover from some of its losses that it had suffered recently.
EURO rallies somewhat
The euro rallied by 30 points in the first part of the European session on Thursday. EUR/USD saw a pointed 80 point setback in late trading on Wednesday, soon after the gloomy news about US fiscal cliff talks together with some unhelpful remarks from the Greek finance minister to send equities lower. There are also indications that in 2013 there are possibilities of breaking Greece’s membership from the Eurozone due to the rise in popularity of the extreme left wing anti-austerity parties in the Greece government. The EUR/USD closed approximately at 1.3225 after the reports of the comments of the Greek finance minister went public.
As of Thursday there was a slight gain throughout the day’s session. On the other hand the news of Germany cutting its debt issuances in 2013 to 250 billion euros sent the single currency towards 1.3250 against the USD.
Presently the euro is trading slightly below 1.3250 in opposition to the USD. A new eight month high was set on Wednesday around 1.3308, and that could now give resistance. Support may possibly be provided by an earlier resistance level at 1.3158.
BOJ meeting helps Yen to recover
After a long 20 month low against the USD, the yen recovered after the Bank of Japan maintained its inflation goal at 1%, at the same boosting financial stimulation and agreeing in principle to review the price target. Earlier this month the yen had fallen low against all its major pairs as the newly elected Prime Minister gave a clarion call for harsh inflation measures. Soon after the announcement the market got touchy about the inflation target and the yen became over extended, but now there is some pullback.
After the BOJ decision, the yen gained 0.2 percent to 84.27 per dollar on Thursday at 8:58 am New York, after declining on Wednesday to the least point ever since April 12, 2011. The yen climbed 0.3 percent to 111.96 per euro. It is expected that by June next year, there is every possibility of the yen to trade at 83 per 1 USD.
Crude oil prices decline after reports of US “Fiscal Cliff” standoff
Crude oil prices declined soon after the talks between the US policy makers and leaders on US “fiscal cliff” deal stalled on Thursday.
By noon in Europe, benchmark crude oil was down by 10 cents to $89.88 per barrel in electronic trading on the New York Mercantile Exchange. The contract had jumped by $1.58 on Wednesday, the highest single day price rise in a month.
Talks between US President Obama and Republican House Speaker Boehner have dictated market response in recent weeks. However, on Wednesday it appeared that the deal to steer clear of the supposed “fiscal cliff” of automatic spending cuts and tax hikes expected at the beginning of next year is still out of reach.
If a deal is not reached then hundreds of billions of US Dollars in spending cuts and tax hikes that will take effect may perhaps throw the US economy back into recession, experts feel. This would mean decreasing demand for crude oil and other energy sources.