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Forex: Euro, Pound and Franc Soar Against US Dollar. What Happened?

By , Currency Strategist
27 December 2013 11:40 GMT

Talking Points:

  • US Dollar Plummets Against European FX, Holds Up Elsewhere
  • Regional Haven Flows May Help Explain Unusual Price Action
  • Thin Liquidity Conditions Likely Amplifying FX Market Volatility

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The US Dollar is trading sharply lower, falling as much as 0.4 percent on average against its leading counterparts. The Swiss Franc and the Euro are leading the way higher against the greenback, rising as much as 1.1 and 0.8 percent respectively. The British Pound is not far behind, adding as much 0.6 percent against the US unit.Curiously, gains in non-European FX majors are conspicuously more restrained.

A discrete catalyst for the move is not readily apparent. Regional haven flows may be a possible explanation however. If that is the case, the current dynamic may not have staying power once US financial markets come online and bargain-hunters enter the fray, looking to buy Dollars on the cheap with an eye toward continued “tapering” of Fed QE in 2014.

It is also worth noting that market liquidity conditions are probably extremely thin, with many traders off for the holidays and those at their desks probably unwilling to commit directionally so close to the turn of the calendar year. Lackluster liquidity can amplify moves that would have otherwise appeared more restrained, making for outsized volatility. That warns against interpreting the magnitude of today’s moves as indicative of lasting follow-through.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

23:15

JPY

Markit/JMMA Manufacturing PMI (DEC)

55.2

-

55.1

23:30

JPY

Household Spending (YoY) (NOV)

0.2%

1.8%

0.9%

23:30

JPY

Jobless Rate (NOV)

4.0%

3.9%

4.0%

23:30

JPY

Job-To-Applicant Ratio (NOV)

1.00

0.99

0.98

23:30

JPY

National CPI (YoY) (NOV)

1.5%

1.5%

1.1%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (NOV)

1.2%

1.1%

0.9%

23:30

JPY

National CPI Ex Food, Energy (YoY) (NOV)

0.6%

0.5%

0.3%

23:30

JPY

Tokyo CPI (YoY) (DEC)

0.9%

0.9%

0.9%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (DEC)

0.7%

0.7%

0.6%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (DEC)

0.3%

0.3%

0.2%

23:50

JPY

Industrial Production (MoM) (NOV P)

0.1%

0.4%

1.0%

23:50

JPY

Industrial Production (YoY) (NOV P)

5.0%

5.4%

5.4%

23:50

JPY

Retail Trade (YoY) (NOV)

4.0%

3.0%

2.4%

23:50

JPY

Retail Trade s.a. (MoM) (NOV)

1.9%

1.0%

-0.9%

23:50

JPY

Large Retailers' Sales (NOV)

0.6%

0.7%

-0.1%

1:30

CNY

Industrial Profits YTD (YoY) (NOV)

13.2%

-

13.7%

1:30

JPY

Labor Cash Earnings (YoY) (NOV)

0.5%

0.3%

-0.1%

4:00

JPY

Vehicle Production (YoY) (NOV)

10.2%

-

10.1%

7:03

CNY

Leading Economic Index (NOV)

99.64

-

99.62

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:45

EUR

French PPI (MoM) (NOV)

0.5% (A)

-0.3%

Low

7:45

EUR

French PPI (YoY) (NOV)

-0.6% (A)

-1.3%

Low

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3610

1.3648

1.3669

1.3686

1.3707

1.3724

1.3762

GBPUSD

1.6217

1.6308

1.6359

1.6399

1.6450

1.6490

1.6581

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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27 December 2013 11:40 GMT