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Forex Analysis: US Dollar May Rise with "Fiscal Cliff" Woes in Focus

Forex Analysis: US Dollar May Rise with "Fiscal Cliff" Woes in Focus

2012-12-10 08:49:00
Ilya Spivak, Head Strategist, APAC
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The US Dollar may rise on haven demand amid fears that a deal to avoid the “fiscal cliff” remains elusive as US President Obama pitches his proposal.

Talking Points

  • Dollar May Rise on “Fiscal Cliff” Deadlock Fears as Obama Speaks in Detroit
  • Yen Gains on Haven Flows as Japanese GDP, Chinese Export Data Disappoint
  • Euro Underperforms After Italian PM Monti Pledges to Resign Over the Weekend

The economic calendar is quiet through the remainder of the trading day, putting the spotlight on US President Obama as he delivers a speech in Detroit to promote his plan to avoid the “fiscal cliff”, a set of spending cuts and tax hikes due to trigger at the turn of the calendar year. The Congressional Budget Office (CBO) estimates the burst of austerity – if left to trigger as scheduled – is likely to tip the US back into recession in the first six months of 2013. Republicans and Democrats have been at loggerheads on a compromise plan to avoid the “cliff” and more of the same is likely to weigh on risk appetite, boosting haven demand for the US Dollar. Obama’s plan features $1.6 trillion in tax increases and $600 billion in spending cuts.

The Japanese Yen advanced in overnight trade on the back of safe-haven demand as the final revision of third-quarter Gross Domestic Product data showed the economy shrank -0.9 percent compared with 0.8 percent expected. A worrisome set of Chinese trade figures reinforced regional growth concerns, showing exports added a meager 2.9 percent year-on-year in November. This marked the lowest reading in three months and a sharp deviation from forecasts calling for a 9.0 percent increase. The Euro underperformed after Italian Prime Minister Mario Monti announced he would resign after the 2013 budget is passed this month, feeding uncertainty about future policy in the largest of the so-called “PIIGS” countries.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:30

CNY

Consumer Price Index (YoY) (NOV)

2.0%

2.1%

1.7%

1:30

CNY

Producer Price Index (YoY) (NOV)

-2.2%

-2.0%

-2.8%

5:30

CNY

Industrial Production (YoY) (NOV)

10.1%

9.8%

9.6%

5:30

CNY

Industrial Production YTD (YoY) (NOV)

10.0%

10.0%

10.0%

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (NOV)

20.7%

20.9%

20.7%

5:30

CNY

Retail Sales (YoY) (NOV)

14.9%

14.6%

14.5%

5:30

CNY

Retail Sales YTD (YoY) (NOV)

14.2%

14.1%

14.1%

21:45

NZD

Manufacturing Activity (3Q)

1.6%

-

-0.8% (R+)

23:50

JPY

BSI Large All Industry (QoQ) (4Q)

-5.5

-

2.2

23:50

JPY

BSI Large Manufacturing (QoQ) (4Q)

-10.3

-

2.5

23:50

JPY

Nominal GDP (QoQ) (3Q F)

-0.9%

-0.9%

-0.9%

23:50

JPY

GDP (QoQ) (3Q F)

-0.9%

-0.8%

-0.9%

23:50

JPY

GDP (Annualized) (3Q F)

-3.5%

-3.3%

-3.5%

23:50

JPY

GDP Deflator (YoY) (3Q F)

-0.8%

-0.7%

-0.7%

23:50

JPY

Current Account Total (¥) (OCT)

376.9B

230.9B

503.6B

23:50

JPY

Adjusted Current Account Total (¥) (OCT)

414.1B

247.0B

-142.0B

23:50

JPY

Current Account Balance (YoY) (OCT)

-29.4%

-59.0%

-68.7%

23:50

JPY

Trade Balance - BOP Basis (¥) (OCT)

-450.3B

-450.0B

-471.3B

23:50

JPY

Bank Lending Banks ex-Trust (NOV)

1.3%

-

1.1%

23:50

JPY

Bank Lending incl Trusts (YoY) (NOV)

1.0%

-

0.8%

0:01

GBP

Lloyds Employment Confidence (NOV)

-42

-

-35

0:30

AUD

Home Loans (OCT)

0.1%

3.0%

1.1% (R+)

0:30

AUD

Investment Lending (OCT)

5.5%

-

8.8% (R+)

0:30

AUD

Value of Loans (MoM) (OCT)

-0.2

-

1.4% (R-)

2:13

CNY

Trade Balance ($) (NOV)

19.63B

26.85B

31.99B (R+)

2:13

CNY

Exports (YoY) (NOV)

2.9%

9.0%

11.6%

2:13

CNY

Imports (YoY) (NOV)

0.0%

2.0%

2.4%

4:30

JPY

Bankruptcies (YoY) (NOV)

-12.0%

-

6.0%

5:00

JPY

Consumer Confidence (NOV)

39.4

-

39.7

6:00

JPY

Eco Watchers Survey: Outlook (NOV)

41.9

-

41.7

6:00

JPY

Eco Watchers Survey: Current (NOV)

40.0

-

39.0

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

German Imports s.a. (MoM) (OCT)

0.4% (A)

-1.6%

Low

7:00

EUR

German Exports s.a. (MoM) (OCT)

-0.3% (A)

-2.4%

Low

7:00

EUR

German Trade Balance (€) (OCT)

15.5B (A)

16.9B

Medium

7:00

EUR

German Current Account (€) (OCT)

13.5B (A)

16.3B

Medium

9:30

EUR

Euro-zone Sentix Investor Confidence (DEC)

-16.9

-18.8

Low

10:00

EUR

Italian GDP s.a. and w.d.a. (QoQ) (3Q F)

-0.2%

-0.2%

Low

10:00

EUR

Italian GDP s.a. and w.d.a. (YoY) (3Q F)

-2.4%

-2.4%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2830

1.2975

GBPUSD

1.5976

1.6092

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

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

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