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FOREX: Dollar Pullback Likely to Continue, SNB Quarterly Report on Tap

FOREX: Dollar Pullback Likely to Continue, SNB Quarterly Report on Tap

2011-12-23 05:56:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Australian Dollar Carried Higher as US Data Bolsters Asian Exports Outlook
  • SNB Quarterly Bulletin Eyed for Insight on New CHF-Capping Policy Measures
  • S&P 500 Index Futures Hint Risky Assets Recovery to Continue into Week-End

Most major currencies were little changed against the US Dollar in overnight trade as already thin pre-holiday trading conditions were compounded by a market closure in Tokyo. The Australian Dollar outperformed, adding 0.4 percent on average against its leading counterparts, as stocks pushed higher across Asian bourses and carried the sentiment-linked currency along for the ride. The MSCI Asia Pacific regional benchmark equity index added 1.4 percent as traders reacted to yesterday’s supportive US economic data set. A University of Michigan gauge of US Consumer Confidence was revised to yield the highest reading in six while Jobless Claims fell more than economists expected, boosting Asian exporters’ outlook for overseas demand.

Looking ahead, the release of the Swiss National Bank’s Quarterly Bulletin is the only bit of significant economic news on the docket. Traders will be most concerned with the bank’s planned approach to curtailing Swiss Franc appreciation as the Eurozone debt crisis continues to fester, building upward pressure on the previously go-to safe haven currency. Although December’s SNB policy announcement did not introduce additional variables into the mix – opting to contend itself with familiar threats of buying foreign currency in “unlimited amounts” to hold EURCHF above 1.20 – new threats from Swiss Finance Minister Eveline Widmer-Schlumpf earlier this week hint something may be afoot. Ms Widmer-Schlumpf said a government panel was considering measures including capital controls and negative interest rates on foreigners’ CHF-denominated accounts to battle Franc strength. Any such steps would be no doubt coordinated with the SNB and investors will be on the lookout for clues hinting at their emergence as the Bulletin crosses the wires.

On the sentiment front, S&P 500 stock index futures are trading firmly higher in Asia, hinting the corrective unwinding of bets on risk aversion amid year-end profit-taking is set to continue. A supportive set of second-tier US economic indicators due in the afternoon promises to reinforce this dynamic. Durable Goods Orders are expected to rise 2.2 percent in November, marking the largest increase in four months, while New Home Sales rise to the highest since April over the same period. Personal Income and Spending readings are likewise on tap, with forecasts calling for both to inch higher once again (marking the third consecutive increase in the former and the fifth one in the latter). Needless to say, this bodes ill for the safe-haven greenback against its stocks-correlated counterparts.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:00

NZD

Money Supply M3 (YoY) (NOV)

6.5%

-

5.5%

1:35

CNY

MNI Flash Business Sentiment Survey (DEC)

53.7

-

54.6

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:30

EUR

French Gross Domestic Product (QoQ) (3Q F)

0.4%

0.4%

Low

6:30

EUR

French Gross Domestic Product (YoY) (3Q F)

1.6%

1.6%

Low

7:45

EUR

French Producer Prices (YoY) (NOV)

5.2%

5.8%

Low

7:45

EUR

French Producer Prices (MoM) (NOV)

0.0%

0.5%

Low

9:00

EUR

Italian Hourly Wages (MoM) (NOV)

0.2%

0.0%

Low

9:00

EUR

Italian Hourly Wages (YoY) (NOV)

1.7%

1.7%

Low

9:30

GBP

Index of Services (MoM) (OCT)

-0.1%

0.1%

Low

9:30

GBP

Index of Services (3Mo3M) (OCT)

0.3%

0.6%

Low

9:30

GBP

BBA Loans for House Purchase (NOV)

35400

35295

Low

9:30

CHF

SNB Publishes Quarterly Bulletin

-

-

Medium

10:00

EUR

Italian Consumer Confidence Index s.a. (DEC)

95.5

96.5

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3005

1.3144

GBPUSD

1.5642

1.5721

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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