Positive risk outlook recovered off its post Fiscal Cliff Plan B vote pull, with euro-dollar holding most of the European morning above $1.3200, and well off overnight lows of $1.3180. Thin end of year conditions has left rates open to order-driven trade, in what would be an otherwise subdued session, though ranges remain relatively tight. Focus going into the US session will be on Fiscal Cliff developments.
Euro opened early Europe at $1.3203, closed in NY Thursday at $1.3247 after it had managed to recover off pullback lows of $1.3215 from earlier highs in the session of $1.3295. Rate extended recovery to $1.3253 into early Asian dealing before turning lower on reaction to S&P downgrade of Cyprus. This move lower gained momentum as headlines flashed that the Fiscal Cliff Plan B vote had been pulled due to lack of support – prompting risk aversion. Swiss name sales from $1.3240 took rate to an initial react low of $1.3220. Announcement that there would be no vote on Cliff plans until after Christmas added to the negative tone and took rate through $1.3200 to an eventual low of $1.3180 before meeting prime broker demand. Rate settled between $1.3190/1.3210 ahead of Europe. Rate touched $1.3215 in early Europe before dropping back to $1.3188. Fresh demand emerged to lift rate to an extended recovery high of $1.3228 on order-driven trade, with the end of year thin conditions exaggerating moves. Rate dropped to $1.3191 on order exhaustion before settling back above $1.3200.
JPY opened in early Europe at Y84.02 and Y110.94, euro-yen was pressed lower through Asian trade Friday as rate reacted to the risk aversion caused by the announcement that the Fiscal Cliff Plan B vote had been pulled due to lack of support. Further comments that a new vote wouldn’t occur until after Christmas added to the negativity and pressed rate to lows of Y110.63. The move dragged dollar-yen down from an early high at Y84.45 to Y83.86. European corporates were seen as interested buyers into the euro-yen dip and allowed for a recovery to Y111.16, while dollar-yen edged back to Y84.13, though both rates were meeting headwind sales into the new session. Dollar-yen extended losses in early Europe and made a show back under Y84.00 to Y83.88, euro-yen slipped to Y110.67. Support in the dip cushioned moves and sharp cross demand extended recovery pullback efforts to Y111.43, dollar tracked the move to Y84.27. Profit-take sales later pared gains as traders played the range in quiet Christmas markets. Dollar-yen last Y84.10, euro-yen Y111.13.
US: Reported comments from US officials overnight:
In a major setback, House Speaker John Boehner announced Thursday evening that he cancelled a House vote on his so-called “Plan B” to avert much of the fiscal cliff because he is unable to pass the bill in the House. In an abrupt, even stunning reversal, Boehner said in a statement that he cancelled the vote because the package did “not have sufficient support from our members to pass.” This is a major defeat for Boehner whose decision to abandon talks with President Obama and pursue the “Plan B” strategy struck many lawmakers as incomprehensible. In his statement, Boehner said that “now it’s up to President Obama to work with Senator Reid on legislation to avert the fiscal cliff.”
EUROZONE: Reported comments from Eurozone officials Friday:
FRANCE HOLLANDE: There is no recession in France
– With no growth early 2013, unemployment to grow
– See 2013 still weighed down by events of crisis
– 3% deficit is our objective, will be reached
– Decisions taken allow us to see exit from the crisis
EUROZONE: Data released in the Eurozone Friday,
GERMANY: GFK; Jan consumer morale seen at 5.6; Dec rev 5.8
– GFK consumer morale below expected; MNI median fcst 5.9
– Consumer morale still satisfactory despite moderate fall
FRANCE: Dec mfg sentiment index 89; Nov 88 – INSEE
– Mfg sentiment above expected; MNI survey median forecast 88
EMU DATA: French stats agency Insee expects Eurozone GDP to decline by 0.3%
q/q in 4Q, stabilize in 1Q and recover by 0.1% in 2Q.
– Eurozone HICP inflation seen at +2.2% y/y in Dec, +2.0% in June
LOOKING AHEAD:
US data starts at 1330GMT with Durable Goods and Personal Income, Expenditures.
– Personal income is expected to rise 0.4% in November. Non-farm payrolls were up 146,000 in the month, while the average workweek held steady at 34.4 hours and hourly earnings were up 0.2% after a flat reading in October. PCE is expected rise 0.4% after falling in October on the impact of Hurricane Sandy. Retail sales were up 0.3%, but were flat excluding a rebound in motor vehicle sales. The core PCE price index is expected to rise 0.1%, the same increase as in October.
– Durable goods orders are expected to be up 0.1% in November following a revised 0.5% increase in October. Boeing reported 124 orders in November, down from the 152 orders reported in October.
– This is followed at 1455GMT by the University of Michigan Sentiment Index, which is expected to be revised up to 75.0 in December, still well below the 82.7 reading in November.
– BLS State Unemployment, Mass Layoffs data follows at 1500GMT, while Kansas City Fed Production data rounds the calendar off at 1600GMT.
EasyForexNews Research Team