Euro Activities As Fluidity Tightens

A firmer reading from the German ZEW economic sentiment survey, due at 0500 ET, will likely support the euro, while a lower-than-forecast number could see it give up recent gains. On Monday a German PMI survey beat expectations.

The euro rose 0.1 percent against the dollar to $1.3772. The common currency also stayed within reach of a five-year peak against the yen, rising about 0.1 percent to 141.82 yen.

The euro also rose against the Swedish crown after the Riksbank cut the repo rate as expected. The crown fell to a session low of 9.0791 per euro in high volumes after the central bank struck a dovish note by lowering the rate path.

The single currency has shrugged off some poor recent economic data - particularly inFrance - to surprise many analysts and move higher since the summer.

A key driver has been tighter money markets, as banks repay cheap European Central Bank loans. Liquidity usually tightens towards the end of the year anyway, when banks hold off from lending to each other.

This year, another factor driving euro strength is European banks repatriating funds to shore up their capital bases before an ECB Asset Quality Review (AQR). EU banks reduced their assets by 817 billion euros between December 2011 and June 2013, according to the European Banking Authority.

"(Euro/dollar) above $1.35 is not fundamentally justified if you look at what's happening in the U.S. and Europe. But underlying flows are euro-positive," said Carl Hammer, chief currency strategist at SEB in Stockholm.

"Obviously everyone is waiting for the Fed decision. We are looking for the Fed to initiate cautious tapering," he said. He expects bond-buying to be reduced by $5-10 billion and the unemployment threshold - when the Fed would consider raising interest rates - to be lowered to 6 percent.

The Fed begins its latest two-day policy meeting on Tuesday. A majority of economists polled by Reuters expect it to taper its huge bond-buying program in March, although the odds on a move this month or next have shortened after a run of upbeat data.

The dollar, which hit a five-year high of 103.925 yen on Friday, was down marginally at 102.97 yen. There was talk among traders of options expiring at the 103 yen level, which could help keep the Japanese currency at these levels.

U.S. economic data continues to suggest improving prospects, with industrial production posting its biggest increase in a year in November, finally pushing industrial output above its pre-recession peak.

"Some of the momentum that we saw in some currencies, like dollar/yen, euro, sterling, it seems to have faded at the moment, which could be partly going into year-end with less liquidity and some profit-taking, which could be limiting moves," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

The Australian dollar fell 0.2 percent to $0.8934, heading back towards the more-than-three-month low it hit on Friday, after the release of the minutes of the Reserve Bank of Australia's December 3 policy meeting. The RBA said the Aussie is still uncomfortably high despite the fact it has weakened noticeably over the past month.

Australia's government has also abandoned any intentions of returning to a budget surplus and predicted deficits for the next decade without spending cuts.

Source:http://www.reuters.com

Gold bumps to the highs of the day in a vote for no taper

It’s all about the taper this week. With stocks higher and now gold joining in the fun, the market is saying that a taper is less likely. Prices are up $4 to $1242 after falling as low as $1220 on Friday.

There is an infinite amount of chatter on what the Fed will do Wednesday. CitiFX breaks down how it sees economists:

• 35% expect a Dec taper with some dovish comments to soften the blow, like a commitment to low rates for longer
• 25% expect no taper but a solid commitment to one in January in the statement
• 20% say no taper with Fed saying they need to see a longer period of improvement in labor and the economy
• 15% no taper and with non-committal but more hawkish language
• 5% looking for a taper with no additional dovish language  

Source: http://www.forexlive.com/

Australian Dollar Skidding Along the Back Although Appearing a Fluctuate

AUD/USD has declined for 8 consecutive weeks for the first time in more than 20 years. The pair tried the downside again today, touching as low as 0.8920 but has rebounded to 0.8956, down just a handful of pips on the day as risk appetite improves.

Bids rest down at 0.8920 with a barrier at 0.8900. The overnight high in Asia was 0.8965 with offers beginning at 0.8985 with more at 0.9000 and buy stops above 0.9020.

I like a bounce here but it’s tough to take sides ahead of the FOMC..

Source:http://www.forexlive.com/

Apportion Us Many at Cost Money Chatters Portugal

To help aid the exit from the bailout the Portuguese deputy minister for Europe wants some cheap money from Europe.

The loans are part of a scheme being floated about to offer member states as an incentive for carrying out economic reforms and will be up for discussion at a senior officials meeting on Wednesday.

As the last five years of turmoil haven’t been incentive enough for countries to get their houses in order I’m fully supportive of the scheme 

Source:http://www.forexlive.com

December US effects state constructing index 0.98 vs 4.75 exp

• Prior -2.21
• Employment unchanged at 0.0
• New orders -3.54 vs -5.53 in Nov
• Prices paid 15.66 vs 17.11 prior
• Business conditions 35.72 vs 37.51 prior

A recovery of sorts from last month but not one that’s cause for a ticker tape parade. As has been the case with these types of surveys the employment component is still floundering. Makes you wonder where all the jobs are coming from .....

Source:http://www.forexlive.com

Canadian Nov Existing Home Sales

Data from CREA:

• Prior reading was -3.2%
• Prices up 4.1% vs Nov 2012
• Sales rose 5.9% y/y

This data set has been under fire for inaccuracy, in particular, the way it handles revisions. At face value, it’s the second month in a row of declines but nothing to worry about. CREA says the market is in ‘balanced’ territory, which is no surprise coming from an association of realtors.

Source:http://www.forexlive.com/

US Account Bonds Not Appointed to the Bin Due Yet

The US saw a turnaround in capital outflows in October from $97.6bn to inflows of $194.9bn.

Foreign buyers picked up $39.7bn in Treasuries from $28.5bn in Sep while Japan’s holdings fell marginally to $1.174tn from $1.178tn prior. China increased theirs to $1.305tn from $1.294tn.

Foreign buyers of equities took a fall to $7.8bn from $14.7bn

Source:http://www.forexlive.com/

US Stocks Jump At The Open Market

The S&P 500 is up 14 points to 1790 shortly after the open. The index was flat on Friday and the jump is significantly stronger than futures were indicating.

US stock futures were down overnight, touching as low as 1760 at one point — 30 points below the current level.

Source: http://www.forexlive.com/

Latest Pakistan Open Market Forex Rates

FOREX RATES Pakistan Open Market Forex Rates Updated at : 16/12/2013 6:25 PM (PST)
Currency	Buying	Selling
Australian Dollar	96	96.25
Canadian Dollar	101	101.25
China Yuan	17.55	17.8
Euro	146.75	147
Japanese Yen	1.055	1.08
Saudi Riyal	28.4	28.65
U.A.E Dirham	29.1	29.35
UK Pound Sterling	175	175.25
US Dollar	107	107.25

Australian Dollar Faces Make-or-Break Event Risk as FOMC Meets

Australian Dollar Faces Make-or-Break Event Risk as FOMC Meets

Fundamental Forecast for Australian Dollar: Neutral

• Australian Dollar Floundered Alongside US Treasury Yields on Fed QE “Taper” Bets
• FOMC Now in Focus; Outright QE Reduction, Hawkish Rhetoric to Sink the Aussie
• DailyFXSSI Speculative Sentiment Gauge Argues for Further Aussie Dollar Selling

The Australian Dollar accelerated downward last week, losing nearly 2 percent against its US namesake and entering the weekend at the lowest level in three months. The move lower over the past eight weeks has closely mirrored a recovery in benchmark 10-year US Treasury bond yields, suggesting the liquidation reflects building speculation about an imminent cutback of the Federal Reserve’s QE3 asset purchases.

The foundation for scaling down stimulus appears to be in place. Fiscal drag fears – already on the decline since end of the government shutdown in mid-October – appear to have all but faded after Congress secured a two-year budget deal last week. Meanwhile, US economic data has increasingly outperformed relative to market forecasts since the beginning of November (according to data compiled by Citigroup). Finally, near-term inflation expectations have started to perk up, with the 1-year breakeven rate (a measure of the price growth outlook priced into bond yields) surging in late November to the highest level since mid-April.

The moment of truth arrives next week as the Fed’s policy-setting FOMC committee meets for its sit-down of the year. A Bloomberg survey shows that 14 out of 65 polled economists expect a slowdown in MBS purchases while 20 out of 65 predict a reduction in Treasury bond intake. That points to a dramatic increase in taper bets compared with what the same survey showed just a few weeks ago but leaves those calling for the status quo in the majority. 

On balance, that skews outsized volatility risk toward the hawkish side of the spectrum, meaning the most potent outcome is likely to be an outright QE cutback. A decision to hold off this time around against a backdrop of taper-supportive cues in the Fed’s updated set of economic forecasts and/or Ben Bernanke’s last press conference as Chairman represents the second-most volatile scenario. 

Either outcome is likely to give a negative jolt to risk appetite trends while pushing the US Dollar higher, amplifying selling pressure on the Aussie in the process. Needless to say, the absence of either of these developments stands to yield the inverse dynamic, although follow-through might be less dramatic considering such a result would fall broadly in line with the consensus view.

On the domestic front, December’s HSBC Chinese Manufacturing PMI report represents the only bit of noteworthy event risk. Expectations call for a slight pickup in factory-sector activity. As a stand-alone release, this might have helped the Aussie higher, but taken against a backdrop of Fed-related macro gyrations across the financial markets the data may not even register on investors’ radar.
Source: http://www.investopedia.com/forex/news/

Latest Open Market Forex Rates - December 12 2013

Currency	Symbol	Buying	Selling
U.S. Dollar	USD	107.15	107.40
Euro	EUR	147.00	147.25
British Pound	GBP	175.50	175.75
UAE Dirham	AED	29.15	29.40
Saudi Riyal	SAR	28.45	28.70
Kuwaiti Dinar	KWD	381.00	381.25
Canadian Dollar	CAD	100.50	100.75
Australian Dollar	AUD	97.75	98.00
Omani Riyal	OMR	280.00	280.25
Japanese Yen	JPY	1.06	1.08
Malaysian Ringgit	MYR	33.25	33.50
Qatari Riyal	QAR	29.20	29.45
Bahrain Dinar	BHD	286.25	286.50
Thai Bhat	THB	3.25	3.40
Chinese Yuan	CNY	17.55	17.80
Hong Kong Dollar	HKD	13.60	13.85
Danish Krone	DKK	19.55	19.80
New Zealand Dollar	NZD	88.65	88.90
Singapore Dollar	SGD	85.55	85.80
Norwegians Krone	NOK	17.40	17.65
Swedish Krona	SEK	16.15	16.40
Swiss Franc	CHF	120.65	120.90
Indian Rupee	INR	1.65	1.75