Thin Holiday Trading

USD

Thin holiday trading has taken over the broad markets as more investors head for the doors for the Christmas holiday. Today and tomorrow will be the last days of trading this week and it should be noted that most of the crowd will likely leave early tomorrow if given a chance. The USD range traded against nearly all the majors and stayed within the stronger parts of its values against the EUR and GBP. The Sovereign Debt issue has not gone away in Europe and yesterday’s news centered on further downgrades coming against Spanish banks and possibly Portugal bonds by a couple of the ratings services.

The U.S. will release data today with the Final GDP and Existing Home Sales figures, and both numbers are expected to show a slight improvement. While trading is thin, these two reports could affect what exist of market sentiment. Good reports may be able to give the equity markets on Wall Street a bit of holiday cheer. Economic data from the U.S. has been slightly improved as of late and it will be interesting to see the GDP and housing sector data perform. Tomorrow the States releases a host of figures with the Core Durable Goods, weekly Unemployment Claims, and New Home Sales. These are important economic reports also, but the question is how much volume will exist in the broad markets to trade off of the data.

EUR

The USD continues to show that it is has staying power against the EUR and GBP. This as the European financial crisis goes on without any real solutions being offered for investors to look over. Politicians and officials from the E.U. made an attempt last week to stabilize the crisis by issuing pronouncements, but investors have grown cynical of public statements and are more interested in pure numbers, and officials have been short on documentation as to how they will fundamentally insure that the debt crisis faced by certain E.U. nations will be taken care of long term. The German GfK Consumer Climate reading was released yesterday and disappointed with a mark of 5.4 compared to the estimated result of 5.8. However it is questionable how many investors looked this report over taking into consideration the holiday season and the bad weather in Europe. There will be little in the way of data from the E.U going into Christmas and sentiment will surely continue to come from the debt crisis.

GBP

Public Sector Net Borrowing was released from the U.K. on Tuesday, today the MPC Meeting Minutes report will be issued. However, the Sterling continues to trade under the duress of the European saga and while the U.K. certainly has its own economic problems to worry about, the EUR has weighed upon the GBP.  Tomorrow the U.K. will have BBA Mortgage Approvals for publication, but things will grow very quiet after that. The Sterling is at the weaker side of its range against the USD and it may prove an interesting range trade in a low volume market, but participants will have to be careful if they choose to thread those waters.

JPY &AUD

The JPY and AUD both range traded yesterday like their major counterparts worldwide. The AUD picked up a bit of ground taking into consideration that Gold has found some upward momentum the past two days. The JPY remains perched within a well known consolidated pattern and unless market manipulation comes into the fray should find that it sways within a range the next couple of trading sessions.
Trading will become lighter as the holiday approaches and participants should note that thin markets often bring divergence that does not make a great deal of fundamental sense. There has been plenty of volatility the past few months within the currencies and many investors will be keen to see a quiet market going into the holidays. Today’s daily analysis will be the last one before the Christmas holiday, we will return on Monday. In the meantime Happy Holidays to all.