Post Asian Markets Forex Round Up

As the Christmas holiday approaches, trade volume is beginning to lighten. Volumes are down and commodities and currencies are beginning to find comfortable ranges. The euro is trading at a recent high holding above the 1.31 price level. The EUR/USD is trading at this writing at 1.3170 while the cross of the EUR/GBP is trading at 0.8120 and cable is at 1.6219. The euro gained across the board in early trading on Tuesday morning. There has been no significant news or eco data to support currency movement today, except for some minor data from China. Market sentiment remains positive, as traders rejoice on rumors in the US that President Obama and Republican Leader Boehner have begun to hammer out a deal and that negotiations between the two are making positive headway.

Republican House Speaker John Boehner signaled willingness to move closer to President Barack Obama’s demands as they try to avoid the automatic tax hikes and spending cuts that would take place in the New Year if no deal were reached.

The biggest moves of the day came in the currency market following a landslide election victory for Japan’s LDP on Sunday, which opened the way for a shift in economic strategy to lift the world’s third-largest economy out of recession. The euro rose against the yen as well, but saw its gains on the U.S. dollar undermined by European Central Bank President Mario Draghi, after he reiterated concerns over slow growth of Europe’s economy. The EUR/JPY is trading above the 110.00 price level as traders this morning are making adjustments to yesterday over action and reaction in the currency. The USD/JPY is trading at 84.00 coming off of 84.48

Today, the major market focus will remain the US Fiscal Cliff negotiations. Yesterday Obama offered to back away from his position that tax hikes should begin at $250,000 in annual income, delivering a fresh concession to congressional Republicans as talks to avert the fiscal cliff intensified in Washington.

The White House proposal would leave lower tax rates in place for everyone except those earning $400,000 or more a year. Republican leaders had asked for a higher limit but the offer suggests there is a narrowing in the gap between the two sides.

Mr. Obama is no longer seeking a permanent mechanism to increase the US debt limit, but would settle for a two-year increase in America’s borrowing authority. In a further concession to Republicans, Obama agreed to apply a less generous measure of inflation to government calculation, which would result in lower benefits in the Social Security pension scheme over time a source noted late yesterday.

The economics calendar today is extremely light with UK CPI and PPI being the major data releases. News flow will control market activity and there is a possibility that we might see some headlines from Spain as the economy continues to worsen and Prime Minister Rajoy might be forced to seek relief from the eurozone.