USD – The dollar opens the week towards the lower end of its recent ranges as investors’ collective attention turns to the looming “fiscal cliff” as lawmakers get back to work after the Thanksgiving holiday. In the most recent White House‐sanctioned report aimed at bringing Congressional Republicans to the table, a failure to avert an automatic hike in taxes on the middle class will likely weigh heavily on consumer spending and shave 1.4% off of GDP in 2013. With the December 31st deadline fast approaching, negotiations will likely intensify, garnering increased international attention. The effects are mixed on the dollar with the tension providing support for the greenback in its role as a “safe haven” asset, but undermining the relative attraction of the US economy’s general outperformance. For the week ahead, investors will take note of durable goods orders, consumer confidence, and the house price index on Tuesday. The middle of the week sees new home sales and the Fed’s beige book on Wednesday, and GDP, personal consumption and weekly jobless claims on Thursday. The week closes out with personal income and spending both on Friday. However, the impact of data will be rather muted on the USD with the ongoing fiscal struggles in view. Consequently, expect the dollar to remain range‐bound against most of its major counterparts, albeit towards the lower end.

EUR – The euro has pulled back from early gains, but remains well entrenched towards the top of its recent ranges on the relative lack of news out of the Eurozone. With the US’ fiscal struggles dominating international headlines, investors have opted to move into European assets on signs of relative calm. However, this isn’t to say that the underlying economic deficiencies in the region have been addressed. While policymakers have extended the maturity on some of Greece’s debt instruments for two years, the action has merely delayed the issue. Moreover, the country’s debt‐cutting targets still remain unattainable without a lowering of charged interest, but Greece’s international creditors have not yet decided to ease conditions further. Elsewhere, Spain may again come into focus after the anti‐austerity Catalan Republican Left (ERC) posted substantial gains in a regional election over the weekend. The party has said it planned to use its newly acquired leverage to oppose austerity policies that the federal Spanish government and EU have imposed on the region. ERC leaders are also demanding a clear timeline from Catalan President Artur Mas for a referendum on independence from Spain as a condition for support. Thus, while the common currency may retest its highs, gains will likely be capped in the near term.

GBP – The pound remains towards the top of its ranges against many of its major counterparts, despite coming under increased pressure as a report showed that Britons’ discretionary spending power stagnated in October. Consumer spending for non‐essential items after inflation was unchanged from a year earlier, following an increase of 0.2% and 0.6% in the previous two months. Whereas, spending on non‐discretionary goods like food and drink rose 3.2% from a year earlier. Elsewhere, the BoE surprised the market by naming current Bank of Canada Governor Mark Carney as BoE Governor Mervyn King’s successor. BoE Deputy Governor Paul Tucker appeared to be the frontrunner, but after being wrapped up in the Libor fixing scandal earlier this year, British policymakers opted for a change. Carney has proven rather hawkish for the BoC so investors may begin pricing in a more conservative BoE going forward.

JPY – The yen pared some of its recent losses overnight, but remains towards the bottom of its ranges as investors continue to expect further expansionary policy from the BoJ. However, with European officials scrambling to reach a deal over Greece and US lawmakers grappling with the fiscal cliff, the yen continues to be an investor favorite with few other “safe‐haven” alternatives. Moreover, with technical indicators still suggesting that the yen is oversold against both the EUR and USD, further modest gains are to be expected in the near term.

Commodity Currencies – The commodity linked currencies are slightly lower against the dollar as investors await the results of the Greek aid packages and the Obama Administration’s pending policies on tax and government budget cuts. The CAD remained flat against the dollar, as investors are focusing on last Friday’s strong Canadian GDP data. Administrative changes in the BoC, with BoC Governor Mark Carney to succeed the BoE’s Mervyn King, muddles the outlook for Canadian monetary policy. However, the CAD will remain supported with the Q3 outlook for GDP growth expected to come in at 0.8%. The MXN has come under renewed pressure after Mexico unexpectedly posted a $1.65B trade deficit after a $0.2B surplus in the previous reading. The AUD remains within its recent ranges with no new economic data to provide direction. Consequently, the commodity linked currencies will likely remain within their recent ranges in the days ahead as investors focus on the fiscal situation in the US.

RMB –The Chinese yuan closed at 6.2255, just shy of the record high of 6.2252, after strengthening for six trading days in a row. The PBoC fixed the yuan stronger in response to a lower dollar in global markets overnight. The move came as Chinese firms struggled to reduce long dollar positions. Analysts predict that the central bank will continue to try and limit the pace of the yuan's rise and the currency will continue to test the trading band. With the strengthening trend now firm, however, some traders feel that PBoC may look at this time as an opportunity to widen the trading band above the current 1% level.