The greenback could have further trust of the investors after better than expected Nov US factory orders data have shown increasing by .7% while the market was waiting for decreasing by .4% after falling in October by .7%. This good data came after better than expected series of data have started last week by US December Chicago PMI which came at 68.6 while it was waited to be 61.5 from 62.5 in November which show that we can have stronger than expected and last week weekly jobless claim coming at 388k while the market was expecting 412k which show that there can be improving of US labor report data which are expected to come by the end of this week showing that there is a rising of the US non-farm payroll of December by 135k after adding just 39k in November. We have seen also this week US ISM manufacturing index coming at 57 from 56.6 in November driving up the market confidence in the US growth outlook and the greenback which can have better creditability this year and rising demand for loans driving the bonds yields up further with is brought back trust in the US economy in the beginning of this year which forced the gold to get down below 1400$ again to 1374$ while the next supporting level is at 1360$ then 1329$ and 1315$ amid rising confidence in the business spending. The Aussi has eased back from 1.0285 to nearly parity with the greenback again within the gold easing and the greenback stronger buying sentiment
The commodities have eased back versus the strong dollar too which has been supported from another side by the announcement of the fed's recent meeting minutes which have shown easing of the fed's fear about deflation and appreciation of the yield rising with rising confidence in the US growth outlook which can increase the borrowing and the prices too easing growth downward pressure.
The Single currency could not also keep any gains above 1.34 once again easing below 1.33 despite December EU PMI manufacturing index which rose above US to 57.1 and the recent continuous improving of the market risk appetite which came by the greenback side this time as the market is still worried about the debt contagion inside the Euro zone gloomy by the Estonia recent adoption at this time focusing on the downgrading probabilities of the credit rating of the Euro zone ailing countries of debt which have fallen recently on these countries with negative outlook of their debts as we have seen recently Portugal which has been downgraded by Fitch one notch to A+ with a negative outlook following Ireland which has been downgraded five notches to B
with a negative outlook from Aa2 by Moody's which has announced that it can downgrade the Spanish long term credit rating of Aa1 too.
While the European equities markets are trying to get some gains from this better outlook of US economy, the Asian stocks markets and specially Shanghai are still doing well since the beginning of this week after absorbing the Chinese hiking interest rate in the charismas by .25% cheered by the better than expected data which brought back momentum and volume to the equities again after calming down period has been possessed by Chinese worrying about the inflation outlook taking a tightening monetary stance by raising interest rate .25% twice in less than 3 months requesting from its banks to increase their reserve requirements by 0.5 percent to be the sixth time this year for curbing this inflation pressure upside risks which at a 28-month high at 5.1% in November while it is still benign in US as we have seen recently US CPI of November coming at .1% monthly while it was expected to be .2% and the core figure excluding the food and energy rising by just .1% as expected after 2 months of flat reading. This adopted Chinese policy has actually supported the Yuan hurting the Chinese exports which has really helped US trade balance to get better tightening the trade balance deficit of October to 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ and this is expected to continue as US is still having an unstable housing market growth yet and weak labor market which can support the Fed keep its monetary policy stance unchanged unworried about the inflation outlook.
With this greenback strength, the British pound was the big gainer with rising of December manufacturing PMI to 58.3 while the market was waiting for the same reading of November at 57.5 which brought back the confidence in the UK economy too reducing the current market discounting of adding more funds to its buying bonds plan getting off some of the pressure on the British pound.
God willing, it is important to wait today for US ISM non-manufacturing index which is expected to be 55.6 in December from 55 in November and December US ADP employment to show adding of 100k jobs after adding 93k in November and by the end of this week we wait for US labor report of December which is expected to show 135k rising of the US non-farm payrolls after 39k in November.
Kind Regards
FX Consultant
Walid Salah El Din
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