EURUSD Rallies , Yen Weakens

EURUSD Rallies , Yen Weakens



The risk sentiment was mixed on the Asian markets overnight. In the FX markets, trading was dominated by the volatile price action in the Euro and JPY. The Asian stocks swung between the Japanese Government's extra budget approval, and the concerns about the Chinese inflation figures increase above the expectations. The Japanese's November total current account deficit climbed to Yen -222.4B, vs. Yen -17.1B exp., (Yen 376.9B prior), while the November trade balance deficit worsened to Yen -847.5B from October's Yen -450.3B.

Despite the mediocre November data, the Nikkei 225 advanced by 1.40%, amid the government approval of an extra budget plan (proposed at the beginning of the week.) The Japanese Yen lost against all of its major peers, except NZD. USDJPY climbed to 89.35, its highest level since June 2010. In China, the December m/m CPI came in above the estimations. (CPI m/m at 2.5%, vs. 2.3% exp., 2.0% prior), and pulled the stock markets down overnight. Hang Seng index lost 0.45%, Shanghai's composite wrote-off January gains, and closed the week 1.92% lower. Yesterday's European trading session was driven by the rate decisions announced by the ECB and the BoE. As expected, the key rates remained unchanged at 0.75% for the Euro-zone, and 0.50% (record-low) in UK. However, the catalyst for the aggressive EUR rally was in the press conference, where Draghi insisted on the unanimity of the decision (EURUSD remained bid in Asian trading). Interestingly Draghi refused to discuss if there was any counter discussions came in favor of a rate cut from the members (which was the case in the last meeting).

EUR rallied to 1.3282 vs. USD, consolidating back to January 3rd highs, and reached 0.82167 year-high against GBP. The Sterling slipped over 1.6150. In US, the initial jobless fell slightly to 371K (from the previous 372K), while the continuing claims fell to 3,109K (from 3,245K). The S&P500 gained 0.76%, for the third-consecutive day, Dow Jones Index added 0.60%, and Nasdaq advanced by 0.51%.

Today, the focus is on Switzerland m/m & y/y CPI figures, UK November m/m & y/y Industrial and Manufacturing Production, US December m/m & y/y Import Price Index, and US November Trade Balance, and the US monthly Budget Statement.