U.S. Dollar Trading (USD) was sold off broadly as recent weakness in the Dollar became the new theme. US data did little to stem the tide of selling as the market focused on the coming FOMC meeting and expected rate cut. US Industrial Production fell -0.6% vs. -0.9% forecast. The December New York Fed Index fell to -25.8 vs. -25.4 previously as economic conditions continued to deteriorate. Oil was volatile with news of large OPEC cuts initially buoying the price to $50 a barrel before easing on demand concerns. In U.S. share markets, the NASDAQ was down 32 points (-2.10%) and the Dow Jones was down 65 points (-0.75%). Crude Oil closed down $1.77 ending the New York session at $44.51 per barrel. Looking ahead, Core CPI is seen +0.1% vs. -0.1% previously for a Y/Y rate of 2.1%. FOMC meet and are expected to cut US interest rates to 0.5% from 1.0%.
The Euro (EUR) surged higher on speculation that the US will cut rates creating a greater yield differential between the two currencies. Resistance at 1.3500 was soft at best as the EURO glided up to 1.3700. Gains were mixed against the GBP but the EURO outpaced most of the currencies especially the Yen. Overall the EUR/USD traded with a low of 1.3431 and a high of 1.3726 before closing the day at 1.3700. Looking ahead, Eurozone Services PMI is expected at 41.2 in December and Manufacturing PMI forecast at 34.2.
The Japanese Yen (JPY) with the market unwilling to test the 90 level again the USD/JPY kept to a tight range. Most of the movement was seen on the Crosses with GBP/JPY and EUR/JPY making solid gains on the back of their majors. Q4 TANKAN SURVEY -24 vs. -23 forecast indicating a large fall in manufacturing sentiment. Overall the USDJPY traded with a low of 90.27 and a high of 91.35 before closing the day around 90.60 in the New York session.
The Sterling (GBP) made substantial gains as USD weakness provoked massive short covering on the pound and it rocketed towards 1.5300. After testing 90 on the EUR/GBP, cable strength allowed the pair to ease towards the 89 level. The next big level to relieve downside pressure will be seen at the 1.5500 level. Overall the GDP/USD traded with a low of 1.4923 and a high of 1.5378 before closing the day at 1.5310 in the New York session. Looking ahead, November CPI is seen falling -0.3% vs. -0.2% seen last month. Also released November Retail Price Index seen as 3.1% Y/Y vs. 4.2% previously