US Initial Jobless Claims Positive

With little economic activity across the global arena on account of the festive period, trading activity has remained largely restrained over the past couple of sessions and the trend is likely to continue today. At home, housing market gains continue to raise concerns of a potential housing bubble and the impact of the BoE’s measures to control spiraling house prices will be closely monitored by investors. Meanwhile, the US economic recovery is gaining traction, with recent macro indicators pointing towards a broad based recovery during the final quarter of 2013, with rising expectations of further gains in the year ahead. In the Euro zone, it remains to be seen if economic data over the coming months will back up the upbeat business sentiment prevalent in the region.

Pound Sterling – UK Markets

In a relatively light trading session, the Pound steadily moved higher and breached the 1.64 mark against the US Dollar yesterday, despite the lack of any significant domestic news flows. The upward movement in the Pound during these Christmas and Thanksgiving holidays is largely influenced by recent positive sentiment towards the domestic economy following upbeat data lately, although the buoyant US initial jobless claims numbers limited Sterling’s gains yesterday. Meanwhile, the Pound has continued to tread higher against the greenback in today’s trading session. With little on the global macro front to drive risk sentiment, current upward momentum in the Pound-US Dollar pair is likely to continue in the session ahead. Looking ahead, a slew of domestic macro-economic releases, including the manufacturing and construction PMI reports and important housing market data, are likely to keep Sterling investors on their toes during the next week.

US Dollar – US Markets

The better than expected domestic initial jobless claims numbers failed to lift the US Dollar against the majors amid thin trading yesterday. The number of people filing for initial unemployment benefits fell for the first time in three weeks, reversing the recent downward trend and pointing towards an improvement in domestic labour market conditions heading into the New Year. Moreover, durable goods orders numbers released earlier in the week also painted a positive picture of the US economy and especially the health of the manufacturing sector in the nation. The US Dollar has weakened further against both the Euro and the Pound this morning. With little on offer in terms of economic releases today, investors are already looking ahead to important domestic macro data next week for further direction. A raft of housing market and regional manufacturing reports along with the ISM manufacturing print will be closely followed by investors to ascertain the sustainability of the economic recovery in the world’s largest economy.

Euro – European Markets

The surprisingly positive French producer price inflation report released earlier today has further elevated the common currency against the majors this morning in the midst of a rather subdued trading session. With no major domestic economic data on tap, traders will closely follow the Greek producer prices report later today for insights into the strength of the currency bloc’s economic recovery. However, investors have their hands full in terms of important macro releases during the next week, with the Euro zone consumer price inflation and manufacturing PMI numbers expected to gain considerable market interest. Meanwhile, the single currency traded in a tight range against the greenback yesterday, with investors largely overlooking the positive US labour market data. The Euro continues to remain supported against the majors, amid rising expectations of attaining sustained economic recovery and waning speculation of further loosening of policy by the ECB in the near term.

Other Currencies – Highlights

The Japanese Yen continues to hover near its five-year lows, despite the release of the overnight upbeat domestic inflation report. Japan’s November consumer price inflation print indicated a pickup in the inflationary trend in the nation, steadily moving closer to the BoJ’s 2% inflation target. Additionally, manufacturing activity in the nation expanded at the fastest pace in over seven years for November, largely driven by domestic demand and rising exports. However, weaker than expected labour market and industrial production reports dampened investor sentiment towards the Japanese Yen. Meanwhile, the Japanese Prime Minister, Shinzo Abe, is likely to unveil a new economic growth strategy in June next year focusing primarily on employment, agriculture and health care. With no major domestic economic data on tap during the next week on account of holidays, investors in the Japanese Yen will keep a tab on news flows emanating from both sides of the Atlantic for further direction.