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Greenback Holds Tough in Holiday Thinned Markets |
Volatility Reigns
The USD got a boost yesterday at the expense of most majors as traders
head for the exits early ahead of the holiday season. A surprisingly
strong existing Home Sales number helped the Greenback on its way while
equity markets in New York finished the day in the black. Trading volumes
are decidedly light and price action has been seriously volatile, with the
lack of liquidity adding to the erratic movements of currencies over the
past few sessions. The EUR hit a new three-month low and the pound hit a
two-month low on year-end position-squaring and recent poor data out of
the UK and Europe. A lower-than-expected GDP number from the UK has seen
the sterling slip below 1.60 against the USD, while continuing downgrade
concerns in Europe have seen the common currency slip nearly ten big
figures in the past three weeks.
The pound is under pressure again this morning
on the release of the MPC meeting minutes that were more dovish than
expected, citing no change to the BoE’s quantitative easing program. The
yen has also been slipping this week, breaking key technical levels and
weakening off steadily against the USD, a welcome sight to the Japanese
exporter. Investors seem content to take profits on their trades and park
their money in the US until the new year, bringing the Greenback to a
three-and-a-half-month high while commodities selloff under light volumes.
The rest of this shortened week should see the same choppy trading
conditions, while year-end flows and strained liquidity will make next
week interesting as well.
CAD GDP Released
Monthly GDP figures were released for Canada this morning, printing a
slightly worse-than-expected increase of 0.2% and surprisingly giving the
Loonie a little boost in holiday-thinned markets. The Canadian dollar has
been surprisingly resilient this week, being one of the only majors to not
suffer losses against the USD, and has made huge gains against the GBP and
EUR. The CAD does remain range-bound against the USD, and seems more than
content to stay in this range until some data or event catches the market
off guard. New Home Sales as well as the University of Michigan Consumer
Sentiment figures are on the data docket for today, with a strong number
possible for the former after yesterday’s surprise housing numbers. Any
positive news these days is equity market-positive, but is also lending
strength to the USD, as the negative correlation between the two has
broken down over the past month. As most traders have one foot out the
door already and liquidity is hard to come by, it seems as if any data
released today will have a limited impact.
Brendan McGrath, Senior FX Trader
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