Closing Positions Ahead Of The Christmas Break Sees The US Dollar Strengthen Across The Board

Tom Tong24/Dec/2012Currency Updates

GBP

The pound was little changed against the dollar and the euro as a report showed U.K. house prices fell for a sixth month in December.
Sterling earlier dropped to the lowest level in more than a week versus the U.S. currency. Home prices in England and Wales slipped 0.1 percent, the same November, Home track Ltd. said in an e-mailed statement today. Values are forecast to fall 1 percent next year after a 0.3 percent decline in 2012, the London-based property research group said.
The pound traded at $1.6174 as of 7:30 a.m. London time, after falling to $1.6143, the lowest since Dec. 14. Sterling was at 81.54 pence per euro, after depreciating to 81.68 pence on Dec. 19, the weakest level since June 11.
The pound has gained 1.5 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro declined 1 percent and the dollar fell 2.9 percent.
Gilts returned 2.2 percent this year through Dec. 21, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 4 percent and Treasuries earned 2 percent.

EUR

Euro has managed to reverse about half of the early sessions sixty point loss against the US Dollar. The only piece of news that might have been responsible for the Euro uptick were the comments from EC Vice President Olli Rehn. Rehn said that further French Budget cuts aren’t essential, according to Le Monde. Euro climbed to 1.3230 following the comments.
Also in France, PM Holland said unemployment will continue to rise, but there is no recession. French consumer confidence was reported at 89.0 in December, up from November’s 88.0 consumer confidence.
In Germany, consumer confidence dropped to a yearly low of 5.6. The German Finance Ministry reported today in a monthly report that it expects a rebound after the first quarter of next year, and that figures show an unfavourable start to Q4. Neither release had significant effect on currency trading.

USD

The safe-haven US dollar saw bullish movement against its higher-yielding currency rivals on Friday, following a breakdown in budget negotiations between Congressional leaders and President Obama. The news resulted in fears that the US was closer to going over the “fiscal cliff” of tax increases and spending cuts which threaten to bring another recession. The AUD/USD fell more than 80 pips over the course of the day, eventually trading as low as 1.0393, before closing out the week at 1.0402. The GBP/USD tumbled around 120 pips before finding support at 1.6150. The pair finished the week at 1.6169.

This week, traders should expect a low liquidity environment in the marketplace, as many investors will be on Christmas holiday. That being said, it should be remembered that seemingly random price shifts can occur unexpectedly during slow trading intervals. In addition, US home sales data, set to be released on Thursday and Friday, has the potential to create market volatility. Should either the housing figures or CB Consumer Confidence report, also scheduled for Thursday, show gains in the US economy, the dollar is expected to strengthen as a result.

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Written by Tom Tong

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