New York Open: USD Upward Momentum Continues On Risk Aversion

continues to advance as markets remain risk averse as European concerns elevate. The buck is also gaining on the back of technical momentum with the break of key levels across the major currencies and 11-months highs in the Dollar Index. Global equities are trading lower and UST yields continue to decline as markets shun risky assets in search of safety. The only economic data of note out today was the import price index for Nov. which came in slightly below forecast with a print of +0.7% m/m (cons. +1.0%) and 9.9% y/y (cons. 10.2%).

• EUR break of the 1.30 level against the USD saw follow through to lows of around 1.2965. Market sentiment towards the EUR remains extremely negative despite successful EU debt auctions which saw Italy auctioning its entire target amount of 3B euros while Germany’s auction of 2-year notes saw yields lower. German Chancellor Merkel spoke and said that ‘we’ve begun to create a fiscal union’ with the target of a balanced budget in each EU state. She noted that the ESM ceiling will stay at 500B euro. EUR continues to collapse and trades at 11-month lows against the USD and 10-month lows against the GBP.

• GBP stronger against most of the G10 currencies after better than expected employment data. The claimant count rate for Nov. stayed at 5.0% (cons. 5.1%) and Nov. jobless claims came in at 3.0K vs. expected 13.7K. EUR/GBP is approaching the February lows of just above 0.8350. The pound is weaker against the USD and JPY as the two currencies are more favorable as safe havens in current conditions. GBP/USD is currently trading around 1.5460 and sees the Nov. lows around 1.5425 as the next level of support in the short term.

• JPY firmer against most of the majors with the exception of the USD on safe haven flows. Economic data in Japan showed a downward revision to the Oct. industrial production to 2.2% m/m (prior 2.4%) and 0.1% y/y (prior 0.4%). USD/JPY is testing the 78.00 figure which is likely to be of significance on a daily closing basis. The yen is strongest against the high beta currencies (NZD, AUD, and CAD).

• CAD softer as equity markets and oil decline. Reports that OPEC agreed on a 30M barrel a day ceiling sent oil lower with WTI crude lower by -2.86% at time of writing. The Loonie is trading above 1.0400 against the USD. Economic data out of Canada was mixed with Nov. leading indicators increasing +0.8% (cons. +0.3%) and Oct. manufacturing sales declining by -0.8% (cons -0.6%).

• NOK weaker after the Norges Bank cut rates by more than expected. The policy rate was cut 50 bps to 1.75%. The bank noted that turbulence in financial markets have intensified and that the outlook for the Norwegian economy has weakened. It also said that inflation is slightly lower than projected and the rate cut was done to guard against even lower inflation. USD/NOK spiked to new 11-month highs and approaches the key 6.00 big figure which is around where the highs of 2011 are.