The year has started in the way that many expect it to continue, with the dollar stronger. Overnight, this has been most evident against the Japanese yen, as well as the kiwi and Aussie. It’s against the single currency that things look most interesting from a technical perspective at the moment. The mid 2012 low of 1.2043 is very close; a break below would mean EURUSD trading at levels last seen in mid-2010. Beyond the dollar story, the fact that Greece is heading for an early general election later this month creates fresh uncertainties for the euro, which are likely to weigh on the currency at the margins during the coming weeks. So far, the bond market reaction has stabilised, although yields on the 10 year bond are more than 1% higher to 9.50% as a result. Finally, comments from Draghi in the German press have also added to the weaker tone, the ECB President saying that the ECB stands ready “to alter the size, speed and composition of our measures at the beginning of 2015”.
With today being the bridge day between New Year’s day and the weekend, activity and liquidity are both likely to be on the thin side. Final PMI data is seen in Europe, together with the first reading of manufacturing PMI data in the UK. The US data is confined to ISM manufacturing and construction spending data at 15:00 GMT.