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Asian Session – Absence of macro events leads to sideways action following eventful week

Foreign exchange markets were trying to regain their sense of balance at the start of trading this week, following the very important events of the previous Thursday and Friday.

The US dollar was still trading off Thursday’s lows versus the euro, after the announcement of the November employment report on Friday seemed to seal the deal on a rate hike at the Fed’s next meeting. The euro was buying 1.0864 dollars, off the high of 1.0981 struck in the wake of Thursday’s ECB meeting, which failed to live up to expectations of even more stimulus.

Interestingly, Mario Draghi’s promise when he spoke on Friday for the ECB to do more if the need arose, was met with little euro buying as the rest of the Governing Council may not totally share its President’s views, according to some press reports. There will be few major news for either the dollar or the euro this week, apart from Friday’s retail sales numbers in the United States. October German industrial production missed expectations by coming in at 0.2% month-on-month versus 0.7% expected.

The yen was under some pressure versus the greenback as it traded in a narrow range. According to a Reuters poll, there were expectations by most analysts that the Bank of Japan will inject extra stimulus in the economy during the first half of 2016. The yen also lost ground versus the dollar on Friday following the stronger-than-expected payrolls and a powerful rally on Wall Street. The yen was trading at 123.28.

The pound was holding relatively well versus the greenback, above 1.51, even following weekend reports that the British Prime Minister might campaign in favor of the ‘no’ campaign for his country to remain in the EU, if insufficient progress is made on Britain’s demands to change its relationship with the remainder of the bloc.

Looking ahead to the remainder of the day, there will be little data that could cause volatility. The Eurozone Sentix index of investor sentiment for December and US employment trends and consumer credit are the only data points on the calendar. The pound could see some action as the Bank of England Governor will testify before the parliament in Brussels. Regional Fed Governor James Bullard will also speak later during the US session.

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