Traditionally end of December is known as dead volatility period, but not in 2014. Unusually last week markets traded above 50% of the usual volatility despite 1 day off and in the absence of important fundamental developments.
The US dollar outperformed every other currency and the USD index broke its own previous week’s record and broker above its 90 psychological resistance level, making a historic high of 90.40 surging all the USD pairs higher and higher with better than expected GDP figures and the expectations that in the first half of 2015 the FED would be having a rate hike.
Overall, the highfliers of Monday were Oil, Swedish krona and Russian Ruble. Sweden’s November retail sales figures were announced to rise at a slower pace at +0.5% vs. October at +1.1%, however still above previous expectations. With better than expected retail sales data the SEK strengthened against its counterparts, especially against the USD.
Later on during the US session, November Existing home sales figures were announced. The data came out at 4.93 million, worse than expected and worse than October figures which was 5.25 million.
Tuesday was final Q3 GDP data announcement day in France and the UK. The French data came in line with the expectations, unchanged from the preliminary Q3 data announcements. Meanwhile, the UK data also came in line with the forecasted +0.7% QoQ figures, however the annualized rate was down to 2.6% YoY vs. previous +3.0%.
Meanwhile, EU’s troublesome member Greece held its second round of presidential voting. The coalition government’s presidential candidate Stavros Dimas got 168 votes, 12 votes below the 180 benchmark. This fail led the voting to its 3rd and final round on the 29th of December. If the and when the vote on the 29th of December fails, a general election in late January or early February will become the next big event to watch for Greece and also for Euro as this will put the common European currency under pressure. The good news, however is that the EU is better planned for these issues now than they were a couple of years ago.
During the US session, the 3rd estimate of the Q3 US GDP figures were announced at +5.0% SAAR (Seasonally Adjusted Annual Rate) vs. +3.9% of the second estimates and above the market forecasts at +4.3%. USD strengthened with better than expected US GDP data.
Wednesday, was mostly quite with no major fundamental announcements, except the US initial jobless claims for the 3rd week of December. The data came at 280K, lower than the expected 290K figures and lower than the previous week’s 289K readings.
Markets were closed on Thursday due to the Christmas holiday.
Friday, was majorly quite across the board for most of the trading tools except for the commodities. Despite thinning market conditions due to the Christmas holiday, Gold prices shot almost $20 higher on Friday. However it is unlikely for the Yellow metal to continue to gain for the upcoming weeks as the FED is likely to increase the rates in early 2015.
On Saturday, Japan's government approved on Saturday stimulus spending worth $29 billion as a followup of the prime minister Mr. Shinzo Abe’s economic reforms. This extra stimilus comes just two weeks after the election victory of the prime minister and is likely weaken the Japanese Yen further down.
As we are moving towards the New Year there will not be many market moving events this week. Still the following events could create some volatility:
1. The third attempt to select the president in Greece on Monday the 29th of December
With last week’s 168 votes in favor of the coalition government candidate Stavros Dimas, the coalition is seeking at least another 12 additional MPs votes in order to avoid snap general elections for the country. However from the current trend it seems that this attempt will also be failing.
2. US Unemployment figures for the 4th week of December on Wednesday the 31st of December
With the previous week’s relative disappointment, investors will be following this announcement closely. May the figure fall for another consecutive week; the USD would get under relative pressure.
Authored by Orbex.com