FX market outlook

FX market outlook

Euro holds above $1.04 on Italian bank rescue plan.

 
There was little action in the currency markets on Friday as markets in Japan were closed for a bank holiday and overall trading volumes were low ahead of the Christmas holiday season.

The dollar has been consolidating gains all week against the yen after hitting a 10-month high of 118.65 yen last week. The USDJPY pair traded between 117.30 and 117.60 during the Asian session today.

The dollar index was marginally lower at 103.04 but not far from this week’s 103.65 high.

Investors are digesting a string of US data out yesterday, which was mixed but encouraging on the whole. Third quarter GDP was revised higher to a +3.5% annualized pace from a previous estimate of  +3.3%. Durable goods orders fell 4.6% month-on-month in November but the key measure of capital goods orders in the category of non-defense ex-air, rose 0.9% compared to 0.3% expected.

Disappointment was seen in the report on US personal spending and personal income. Spending was softer last month at +0.2% month-on-month versus +0.3% expected and personal income was flat compared to the +0.3% forecast.

Overall, yesterday’s US data does not change investors’ long-term positive view of the greenback.

The euro remained steady against the dollar to trade above the key $1.0400 level, touching a high of $1.0451. Yesterday the single currency hit a 1-week high near $1.0500 on news that Italian lawmakers approved a plan to prop up the country’s ailing banks. The state-backed rescue plan eased concerns of a crisis in the Italian banking sector.

Oil prices fell today as investors took profits from previous session gains. WTI crude oil slipped 0.5 percent to trade around $52.60 a barrel in the Asian session. Brent crude fell to $54.80 a barrel.

Gold recovered after falling below $1130 to rise to a session high of $1132.15 an ounce.