Mike Paterson’s Daily Forex Brief

After the ups ‘n downs of the past few sessions we’ve seen a little pause for thought as traders await the now imminently expected US budget deal to avoid the so called ‘fiscal cliff’.

President Obama and House Speaker Boehner met again yesterday where Obama delivered a new offer on Monday to resolve the pending fiscal crisis; a deal that would raise revenues by $1.2 trillion over the next decade but keep in place the Bush-era tax rates for any household with earnings below $400,000.

The offer is close to a plan proposed by the speaker on Friday, and both sides expressed confidence that they were closing in on a major deficit-reduction plan that could be passed well before January, when more than a half-trillion dollars in automatic tax increases and spending cuts would kick in.

The reality of necessary administration to implement the measures means the deal needs to be completed this week in theory as I reported here before, and that might explain the current initiatives, plus Santa’s on his way for all good boys and girls of course.

The markets are factoring in an agreement and it may be that the risk-on sentiment is now overplayed, in which case we might expect to see some USD strength against recent trend.

For the moment though, EURUSD is still around 1.3160 having capped at 1.3190 but is still finding good buying interest in the dips down to 1.3150.

GBPUSD has sustained yesterday’s gains above 1.6200 even if the 1.6220 level I mentioned still presents a decent barrier. We’re having another go at it though as I type.

MSPFX forex websiteEURGBP had a move back down to its 0.8110 support (GBPEUR 1.2330 resistance) but been unable to break lower. Overall though, the Pound has had a slightly better time of it.

This morning brings the latest UK inflation data at 09.30 GMT and we should expect some impact if out of line with expectations, otherwise it’s all eyes across the pond for progress on the budget talks. Not forgetting though that the Eurozone still has the vulnerability to take centre stage at any time.

As England’s cricketers quite rightly bask in the glory of a first series victory in India for 27 years and for only the fourth time ever, the man of the series, Cook, rightly puts it up there with an Ashes win while paying fitting tribute to Jimmy and Monty along with the batters. Happy Xmas boys!

Interbank Rates at 08:28 BST

Currency Pair


EURUSD 1.3160
GBPUSD 1.6205
EURGBP 0.8120
GBPEUR 1.2211
GBPCHF 1.4879
GBPAUD 1.5379
EURCHF 1.2084
GBPHKD 12.5637
EURHKD 10.2053
GBPZAR 13.8662
USDJPY 83.91
GBPCZK 31.0260

Today’s Data: BST

09.30-UK – CPI / RPI / PPI

13.30-US – Current Account

18.15-US – FOMC’s Fisher speaks

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.

To contact Mike please call +0044 (0) 1732 700383 or email mike.paterson@economicvoice.com

The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.

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