Thin Pre-Christmas Trading in the Forex Market
Activity in the final trading session before Christmas appears to be light. This morning, the US Dollar is trading broadly lower against its major currency counterparts, as most traders are already off for the upcoming end of the year holidays, reducing liquidity in the market. The only economic data in the US docket that might stir some market interest today is a report on the number of claims filed for unemployment benefits in the past week.
In the UK, the British Bankers' Association (BBA) just now published its latest issue on the number of home loans approved by UK banks. The numbers revealed an unexpected downturn in mortgage lending for November. In Europe, the economic calendar is empty today.
Pound Sterling – UK Markets
The just out data by the BBA showed that UK banks approved fewer mortgages for house purchases in November than a month ago. However, the Pound hardly budged against the greenback post the data, with investors looking little interested as they brace themselves for Christmas and New Year holidays.
Yesterday, the Pound remained vulnerable against the US Dollar in reaction to UK’s soft GDP data. The official figures came in unexpected as growth in Britain’s economy was revised downwards from the previous estimates for the third quarter. Weak growth in financial services was blamed to have been behind the new, lower assessment of growth. However, losses in trading in the pair were capped following better than expected UK current account deficit data. But investor sentiment towards the Pound in regards to the nation’s current account position remains persistently weak. Earlier this week, in more deficit news, public sector borrowing jumped in November. This has strengthened the likelihood that the UK Chancellor will mostly miss the deficit target which was just updated last month.
US Dollar – US Markets
The greenback is trading broadly lower against the basket of major currencies this morning, in a largely subdued trading session as market winds down for pre-Christmas and holiday period. But before the shutters are pulled down, market participants will eye the less-heralded weekly jobless claims, due later in the day, to gauge the state of the US labour market in a real time manner. The trend in the unemployment claims has continued to signal limited layoffs and steady job market conditions, suggesting that the Fed might feel pressured to accelerate the tightening pace in 2016.
The US Dollar traded in a narrow range against the Pound yesterday after data published throughout the session painted a mixed picture of the economy. Orders for US durable goods were flat for November, as the drag on manufacturing from a stronger US Dollar and spending cuts in the energy sector showed little signs of abating. Meanwhile, University of Michigan’s consumer sentiment index rose to a five month high in December, partly due to lower inflationary pressures, which has supported real incomes and boosted households’ purchasing power.
Euro – European Markets
This morning, the shared currency has edged higher against the US Dollar and the Pound. Trading in today’s session appears to be lackluster ahead of the Christmas day holiday tomorrow. On the macroeconomic data front, it is a fairly light day across the globe and no data or event is scheduled in the European docket that could trigger volatility in trading in the Euro against the major currencies.
Looking ahead into 2016, the European economy will continue to face challenges if inflation and growth do not make significant progress. In addition, the prospect of further weakness in emerging economies, especially China, unstable geopolitical conditions in the Middle East and Russia, high level of joblessness and stagnant wage growth are just some of the risks facing the Euro zone in the next year. As for the currency, the Euro will continue to be pressured against its key peers amid heightened possibility of further expansion of stimulus measures by the European Central Bank and even higher rates in the US.
Other Currencies – Highlights
Earlier today, the Bank of Japan (BoJ) Governor Haruhiko Kuroda in a speech following the publication of the minutes of the latest monetary policy meeting assured that the Japanese economy is en route to achieve its desired inflation target. He stated as a matter of fact that under the central bank’s qualitative and quantitative easing programme launched more than two years ago, economic and price trends have turned favourable. He expressed eagerness in making policy adjustments if needed. The BoJ Governor also displayed confidence for the upcoming year, when the Japanese economy will continue to pave the way towards a new phase of growth. His comments once again signal that the BoJ will not embark into further easing anytime soon. The Japanese Yen is trading on a firmer footing against the US Dollar, following BoJ Governor’s display of unwavering determination to overcome deflation.
Later in the day, market attention will shift towards Japan’s national inflation and unemployment rate data to gauge the health of the economy in the final quarter of the year.