Fri 24th Dec: Dollar on the brink of hitting record lows as mixed data and thin markets encourage dollar bears

Dollar tumbles to near record lows against the single currency as a barrage of mixed data releases hit a thin market.
A 12 percent fall in the house sales coupled with a 17k rise in the weekly jobless claims to 333k led to yet another session of sell off in the dollar which touched a high of $1.3505.
The market ignored a better than expected durable sales numbers at 1.6 percent in November and a rise in University of Michigan figures which rose to 97.1 from an expected 95.7.
Further hurting the dollar was the core Personal consumption expenditure figures- a favourite inflationary figure of the Fed- which came at a benign 1.5 percent well within Fed's target of 2 percent.
This led the market to believe that the central bank would not be too aggressive in raising rates in the coming year.
Sterling got pounded late in the session yesterday as UK's current account deficit figures came out much higher than expected at GBP 8.77 billion suggesting that a stronger pound was hurting the exports in the country.
The markets on friday should remain relatively calm as traders would stay from it and take an extended weekend to enjoy Christmas.

Wishing you a Merry Christmas and a Happy New Year!

Thu 23rd Dec: Greenback gains mildly on GDP; Sterling ‘pounded’ by BoE

The headline-grabbing currency in this holiday-mood driven market was the Pound which fell headlong as the BoE startled the markets by hinting at possible rate cuts in Q1 or Q2 rather than stability or even a possible hike in 2005 as previously thought.
The 4-cent drop this week, initiated by the slowdown in the housing activity, was compounded by the MPC meeting minutes that showed that there was a possible deceleration in consumption growth.
But coming to the growth story in US that gave a leg up to the greenback - the GDP grew at a 4% y/y in Q3 beating expectations of 3.9% (previous 3.3%), mainly as a result of drop in imports from 6% estimates to 4.6%.
The Fed Chairman’s favourite indicator of inflation, the PCE index (Personal Consumption Expenditure) grew by a benign 0.9% but with some clues of prices going up.
Oil prices fell more than a $1.50 a barrel following a report of an unexpected rise in U.S. stockpiles, previously projected to have fallen.
With the Japanese markets closed today celebrating the Emperor’s birthday, the dollar was very range bound in the early morning Sydney trade with trading quite subdued.
Despite a clutch of data from a shortened US trading session today, there will not be much participation amongst market players who are biding their time instead untill the New Year.

Wed 22nd Dec: Santa’s pre-X’mas gift to investors

Ahead of Christmas holidays the U.S. stocks rallying on Tuesday, as the Dow closed at its highest level in 3 1/2 years (assisted by rebounds in major pharma and tech stocks) in a typical seasonal buying frenzy.
But even before the US session commenced, Sterling’s performance lost some sheen on news of a sharp fall in UK house prices as the RICS housing price index fell down to -48% (October: -40%) for the 7th straight month in November causing some skepticism about future rate hikes that may negatively effect a deeply indebted property market.
The Euro traded in a narrow range, not losing much to the dollar, as the Euro zone current account surplus rose to EUR 5.5 billion in October beating expectations of a 4.3 billion reading. The expansion came despite a 7% yearly rise in imports and a 3% growth in exports.
The Japanese currency gave up some gains as the closely-watched tertiary index, which measures spending in the service sector, fell 0.1% in October, a further evidence of decelerating growth momentum in Japan. The all-industries index, measuring overall economic activity, dropped 0.4% from the previous month. The economy contracted by 0.1% in Q2 (estimates of 0.3%) with a downward revision of the GDP growth for 2005.
Traders may be just looking to take some profits in majors in pre-holiday thinned trades ahead of few remnant data from the US.

Tue 21st Dec: Dollar resumes in its downward path

The dollar found itself heading lower even as trading remained thin in the run up to the festive season.
A 0.2% increase in the leading economic indicators and oil prices dipping by more than a dollar to end at $45.64 per barrel failed to prop up the US currency.
Markets, which had turned net sellers in the Euro, are only headed higher as traders resume buying the single currency. The euro headed towards the 1.34 mark on renewed buying as markets held their breath moving towards the year-end and trying to preserve whatever gains they can.
Sterling continued oozing bullish sentiments testing the 1.95 levels, as traders increased net long positions in the futures market, fueled by the strong economic releases last week.
Despite a down gradation of the Japanese economy, Yen took its cue from the other majors to move higher above the 104 mark. With focus now on the All-industry/Tertiary survey for a cue on further movements in the Japanese currency.
With a sharp reversal in net positions in the futures, the major crosses are likely to resume their rally gaining against the dollar.

Mon 20th Dec: Dollar ends the week a tad lower

The US Dollar survived a barrage of economic data to end the choppy week marginally lower.
With consumer inflation data springing little surprises (quoting just above 2%), the drop in the dollar was seen more on account of a surprising increase in the German Business Sentiment, nearing its all time high. This was despite the eurozone facing threats from rising oil price and pressure of an appreciating currency.
With the Yen continuing to trade in a range of 103.50-104.50, the best performing major currency was Sterling, which hit the markets with an all-time high of 1.9540. With traders concentrating on the yield curve gaps between two nations, the Pound gathered maximum advantage from positive updates on consumer and producer price inflation, retail sales and the labour market.
All of these, in turn, helped support the suggestion that the Bank of England may have one more rate rise up its sleeve.
We feel traders would be wary of taking any fresh positions before the new - year, forcing the crosses to trade in the range seen off late.
The US crude futures continued to rise as speculators covered their shorts ahead of the cold weather in the Northeast of the US.
Wall Street crept higher this week as muted gains in the key indices masked a series of merger and acquisition activity and left the stock market hovering close to yearly and multi-year highs. By the closing bell, the Dow Jones was down 0.5 % on Friday at 10,650 and the technology-heavy Nasdaq Composite was down 0.5% as well at 2135.