Mike Paterson’s Daily Forex Brief
Last night in Washington the House of Representatives passed a Senate-backed bill to avert the “fiscal cliff” by 257 votes to 167 and the markets breathed a big sigh of relief.
The deal is effectively a band-aid of the sort I suggested in my last blog, delaying the major spending cuts for a couple of months but it sees the tax rises and some that President Obama wanted. The vote has left the Republicans divided as many see the deal as a real climb-down from their original bargaining position.
Perhaps common sense has just prevailed. There’s doubting that there’s plenty more battles ahead and that the US is in no way out of its own particular mire but markets have welcomed the news perhaps simply desperate to cling on to any good vibes out there.
Stock markets have rallied and in these paradoxical times the US dollar has fallen everywhere except versus the hapless Yen as investors and traders alike pour into the “risk-on” plays that we saw feature strongly last year.
EURUSD has flirted with 1.3300 again before falling in back in early European trading, while GBPUSD has capitalized on its big gains from year-end flows seen on Monday and rose to the heady heights of 1.6384 before also falling back this morning.
AUDUSD has risen from 1.0374 to test 1.0500 as I type and USDYEN has made the most of this risk-on/Yen averse to continue its march higher, so far peaking at 87.33.
With GBPUSD’s strong showing we saw EURGBP fall to support lines just below 0.8110 (GBPEUR 1.2330) before bouncing back in Asia to 0.8154 (1.2263) only to fall again as I type and is currently at 0.8116 (1.2314) as EURUSD retreats from its knee-jerk gains.
The Pound is also currently getting lift from better than expected Manufacturing PMI data just in at 51.4 v 49.l forecasts. The figure is the best since September 2011 and will help bolster GBP gains whilst attention focuses elsewhere
Markets will remain nervous heading into 2013 and the Eurozone problems will never be far from the newswires. The 2012 play of picking the best of a bad bunch at any given time will surely ring true for the next 12 months too.
In the generous spirit of the festive season the currently less than mighty Shrimpers have now lost two games on the spin, losing yesterday at home to Gillingham who now returns to the top of the table. It’s all incredibly close up there though with everything most definitely still to play for. Stay tuned for plenty more League 2 thrills n spills!
And as we all take our first tentative steps into 2013 we say a fond farewell to Christopher Martin-Jenkins, aka CMJ, who died yesterday from cancer aged just 67. CMJ became a cricketing institution as a highly-respected journalist and broadcaster with the BBC and as Editor of Cricketer magazine not to mention over 40 years as part of the TMS commentary team. He will be greatly missed in the world of cricket and beyond.
Interbank Rates at 08:53 BST
Today’s Data: BST
09.00-EU – Eurozone Manufacturing PMI
09.30-UK – Manufacturing PMI
15.00-US – Construction Spending / ISM Manufacturing Index
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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 email@example.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.