DIRECTFX : Economic Snapshot

Forex Market Update

Market participants continue to monitor developments surrounding the US fiscal cliff. Doubts over whether a deal would be reached ahead of the year-end deadline intensified, after the US President, Barack Obama, threatened Republicans to 'veto' their plan.

Meanwhile, the Bank of Japan (BoJ) announced this morning that it would add about ¥10 trillion ($119 billion) to its asset-purchase program, citing "a high degree of uncertainty concerning Japan's economy."

Separately, the Australian Treasurer, Wayne Swan stated that achieving a budget surplus in the current fiscal year is unlikely as weaker growth and a strong local currency curb tax receipts. He further stated that A$20 billion revenue hole created by falling commodity prices, an erosion of business tax revenues and the impact of the high Australian dollar has made it difficult for the government to achieve its target.

Greece's Finance Minister, Yannis Stournaras today morning cautioned that the nation could still be forced out of the Euro-zone if it cannot implement the tough fiscal reforms it has promised.

The market's attention would turn to the west-side of the Atlantic where a plethora of economic data is expected to give some distraction to the US budget talks. The final GDP figure in the US is expected to be revised up, whilst manufacturing data is expected to show a slight improvement from the previous month. However, the jobless claims data is expected to show deterioration, validating concerns of the Fed about the labour market.

The greenback traded higher in the New York session yesterday, against the key currencies.

EUR USD

This morning at 10:40 GMT, the EUR is trading at 1.3247 against the USD, 0.14% higher from the New York close. The Euro traded lower initially, as uncertainty over the US 'fiscal cliff' aversion dampened demand for riskier assets. The talks to avert a US fiscal crisis took a surprising turn for the worse yesterday, after the US President, Barack Obama accused his Republican opponents of making the cliff debate personal. Republicans replied back, saying the President's opposition to House Speaker, John Boehner's so-called Plan B is "bizarre and irrational." During the session, the pair traded at a high of 1.3250 and a low of 1.3189. Yesterday, the EUR traded 0.50% lower against the USD in the New York session, and closed at 1.3228.

The pair is expected to find its first support at 1.3188 and first resistance at 1.3308.

GBP USD

At 10:40 GMT, the GBP is trading at 1.6264 against the USD, 0.08% higher from the New York close. In the UK, retail sales remained flat month-on-month in November, disappointing expectations for a slight increase, following a 0.7% fall in the previous month. During the session, the pair traded at a high of 1.6273 and a low of 1.6238. Yesterday, the British Pound traded 0.28% lower versus the Dollar in the New York session, and closed at 1.6251.

The pair is expected to find its first support at 1.6233 and first resistance at 1.6300.

USD JPY

The USD is trading at 83.97 against the JPY at 10:40 GMT this morning, 0.49% lower from the New York close. Monetary actions out of Japan were also on investors' minds this morning, as the Bank of Japan indicated that it would add about ¥10 trillion ($119 billion) to its asset-purchase program, but failed to meet expectations about issuing a new inflation target. During the session, the pair traded at a high of 84.40 and a low of 83.86. In the New York session yesterday, the USD traded 0.11% lower against the JPY, and closed at 84.38.

The pair is expected to find its first support at 83.67 and first resistance at 84.45.

USD CHF

This morning at 10:40 GMT, the USD is trading at 0.9119 against the Swiss Franc, 0.15% lower from the New York close. The Swiss Franc strengthened against the US dollar, after reports showed that Swiss trade surplus increased to CHF 2.95 billion in November. During the session, the pair traded at a high of 0.9156 and a low of 0.9114. In the New York session yesterday, the USD traded 0.38% higher against the CHF, and closed at 0.9133.

The pair is expected to find its first support at 0.9084 and first resistance at 0.9155.

USD CAD

At 10:40 GMT, the USD is trading at 0.9888 against the CAD, marginally higher from the New York close. The pair is expected to trade on the cues from the release of Canadian retail sales data later today. During the session, the pair traded at a high of 0.9894 and a low of 0.9875. Yesterday, the USD traded 0.28% higher against the CAD in the New York session, and closed at 0.9885.

The pair is expected to find its first support at 0.9859 and first resistance at 0.9906.

AUD USD

The AUD is trading at 1.0495 against the USD, at 10:40 GMT this morning, 0.14% higher from the New York close. The Aussie came under pressure briefly, following comments from Australian Treasurer, Wayne Swan that the country is unlikely to reach its goal of a budget surplus this year. During the session, the pair traded at a high of 1.0501 and a low of 1.0464. AUD traded 0.28% lower against the USD in the New York session, and closed at 1.0480.

The pair is expected to find its first support at 1.0467 and first resistance at 1.0521.

Gold

At 10:40 GMT, Gold is trading at $1668.20 per ounce, 0.08% higher from the New York close, as the greenback weakened. This morning, Gold traded at a high of $1673.40 and a low of $1665.50 per ounce. In the New York session yesterday, the yellow metal traded 0.42% lower, and closed at $1666.85.

Gold has its first support at $1663.04 and first resistance at $1674.12.

Silver

Silver is trading at $31.09 per ounce, 0.23% higher from the New York close, at 10:40 GMT this morning. This morning, Silver traded at a high of $31.21 and a low of $30.99 per ounce. Silver traded 1.91% lower against the USD in the New York session, and closed at $31.02.

Silver has its first support at $30.82 and first resistance at $31.52.

Crude Oil

At 10:40 GMT, Oil is trading at $89.85 per barrel, 0.40% higher from the New York close, following reports of a decline in the US crude oil inventories. Yesterday, the Energy Information Administration (EIA) reported that the US crude supplies fell 1 million barrels for the week ended December 14. This morning, Oil traded at a high of $89.87 and a low of $89.42. Yesterday, Oil traded 1.03% higher in the New York session, and closed at $89.51.

It has its first support at $88.46 and first resistance at $90.32.

Economic Snapshot

UK retail sales remain unchanged in November

On a monthly basis, retail sales in the UK remained flat in November, against the expectations for a 0.4% rise and following a revised 0.7% fall in October. Year-on-year, retail sales rose at an annualized rate of 0.9% in November, below expectations for a 1.5% increase, after rising at a revised rate of 0.8% in the preceding month.

German output price inflation eased in November

In Germany, the producer price index edged down 0.1% in November, after staying flat in the previous month. Economists were looking for a 0.2% decline. Separately, import prices remained unchanged compared to October, when they decreased by 0.6%. The index was forecast to fall 0.2% (MoM) in November.

Swiss trade surplus increased in November

Switzerland's trade surplus widened to CHF2.95 billion in November, against the revised CHF2.73 billion surplus recorded in the previous month. Meanwhile, exports increased 6.0% (MoM) in November, reversing a 7.3% drop in October. Also, imports climbed 0.2% in November, compared to a 6.9% drop reported in the previous month.

Italian retail sales decreased in October

On a seasonally adjusted monthly basis, retail sales in Italy declined 1.0% in October, from a revised 0.1% drop recorded in the previous month.

BoJ expanded asset purchase program

The Bank of Japan (BoJ) expanded its asset-buying and lending program by ¥10 trillion ($118.7 billion) to ¥101 trillion by a unanimous vote. The central bank also kept its key interest rate unchanged in the range of 0.0% to 0.1%.

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