Market Brief

The USD has extended gains today after yesterday’s FOMC meeting highlighted a more optimistic assessment of the US labour market. As expected, there was no change to the Fed Funds rate and the accompanying statement retained the crucial remarks that rates would stay at their “exceptionally low” levels for an ”extended period”; however the alteration to last month’s wording that was interpreted as a strong USD-positive was the claim that the decline in the labour market was “abating”. The USD move exploited EUR-negative sentiment from earlier in the session when S&P joined Fitch in cutting Greece’s credit rating and threatened to take further action unless Prime Minister George Papandreou tackled the daunting budget deficit. EURUSD’s dramatic fall throughout the Asian session has taken out major supports at 1.4480, touching a low of 1.4369.

The other major events of the previous session included central bank meetings from both the Riksbank and Norges Bank. There were no surprises at all from the Riksbank as they kept rates unchanged at 0.25% and offered very little new information to the market other than the widely expected confirmation that they would be ending their fixed rate tenders. Today we will get the latest Swedish Unemployment figures which are expected to tick slightly higher to 8.2% from 8.1% prior.

In contrast to the Riksbank, the Norges Bank wrong-footed consensus by hiking rates by 25bps to 1.75% - in line with our own predictions. They noted that the impact of the October hike had been “limited”, but the statement did however ensure that markets did not start pricing a more aggressive hiking cycle going forward by noting that the outlook for 2010 was still uncertain, and revealed that members had considered keeping rates on hold. Norges Bank Deputy Governor Qvigstad said in a subsequent press conference that the expectation was for no further rise in February, but he did not so far as to rule out an increase at that meeting. EURNOK plunged from 8.4400 to 8.3670 on the announcement, and NOK has managed to hold on to gains into today’s session where we await the release of the Norwegian Unemployment Rate (currently standing at an impressively low 2.6%).

The key events coming up in today’s session include UK Retail Sales for November which are expected to post at 0.5% MoM increase after the 0.4% reading last month; and will likely be a major catalyst of GBP direction from here. GBPUSD is currently fighting hard to remain above 1.6200 support, and a surprise either way in this release will likely determine whether we see a further collapse towards 1.6000, or whether we head back into the range for a retest of 1.6484. The afternoon session will be focused on Canadian CPI, and US Leading Indicators.

G10 Advancers and Decliners vs USD
Global Indexes Current Level % Change
Nikkei 225 Index10'163.80- 0.13
Hang Seng Index21'347.63- 1.22
Shanghai Index3'179.08- 2.34
FTSE 100 Index5'289.87- 0.57
DAX Index5'872.72- 0.52
SMI Index6'513.04- 0.30
S&P future1'110.40+ 0.15
World Markets Current Level % Change
Gold1'130.69- 0.63
Silver17.55- 0.90
VIX20.54- 4.42
Crude wti72.32- 0.47
USD Index77.39+ 0.63
Todays Calender Estimates Previous Country / GMT
Unemployment rate, % Dec8.28.1SEK/08:30
Unemployment rate, % Dec2.62.7NOK/09:00
Retail sales, % m/m (y/y) Nov0.5 (3.7)0.4 (3.4)GBP/09:30
Construction output, % m/m (y/y wda) Oct--- (-1.1)---(-8.0)EUR/10:00
CPI, % m/m (y/y) Nov0.3 (0.8)-0.1 (0.1)CAD/12:00
Philadelphia Fed mfg index Dec16.016.7USD/15:00
Leading indicators, % m/m Nov0.70.3USD/15:00
Currency Tech

R 2: 0.9170
R 1: 0.9030
CURRENT: 0.89.10
S 1: 0.8873
S 2: 0.8570

R 2: 1.0750
R 1: 1.0700
CURRENT: 1.0675
S 1: 1.0555
S 2: 1.0480

R 2: 131.60
R 1: 130.75
CURRNET: 129.15
S 1: 128.80
S 2: 126.90

R 2: 12.955
R 1: 12.820
CURRENT: 12.740
S 1: 12.645
S 2: 12.590