Macro Morning – Euro surge derailed by Cliff comments

A night of two halves with optimistic Obama comments driving Euroepan stocks and the Euro higher but then Republican posturing placed the focus squarely back on the possibility that the US might still go over the cliff.

German IFO came in stronger than forecast overnight as well which helped the Euro to surge higher across the board rising to an 8 month high against the US dollar and a 16 month high against the Yen.

German IFO report

As you can see in the chart above both Business Expectations and Business climate have recovered from recent lows which is giving hope in Europe that it’s biggest economy is recovering from the dip this year and as such the economic outlook has brightened a little. Coming in at 1.0204 Germany’s IFO was up on the 1.02 expected and and last months 1.014. In the press release IFO said,

In manufacturing the business climate continued to brighten. Companies assessed their current business situation slightly less favourably than last month, but they are far more optimistic about the future than previously. Business expectations showed their sharpest increase since August 2009. Export expectations also continued to improve.

In the US the market has been unable to kick on with its recent strength and stocks have been down for most of the day as a bit of Fiscal Cliff pushing and shoving has occurred and the housing data overnight was a little weaker than expected. Housing starts came in at an annual rate of 861,000 units from 888,000 last month and 873,000 expected.

On the Cliff President Obama even noted that the two proposals were almost there and essentially put more pressure on the republicans to move but that is the key – US Lawmakers are almost there and Obama said he is willing to compromise and not trying to “rub their face” in it. But it was the Republican comments from John Boehner that the President would be responsible for “all Amercians” taxes going up which were responsible for the Equity market funk post Obama’s comments.

Looking back to Asia yesterday it would be remiss if we didn’t note the fact that the Nikkei climbed back above 10,000 for the first time since April as the BoJ deliberates on the stance of monetary policy and the Yen weakens giving some hope that Japanese corporations may become more profitable.

We are seeing a very interesting end to the year with some very big moves in stocks and currencies after the recent relatively quiet trade. Whether or not these emergent trends continue in 2013 only time can tell but it is very interesting to note and some big moves could be afoot.

Europe got Obama’s positives comments were as the US traded off Boehner’s rejoinder which explains the divergent outcomes. At the close the FTSE was up 0.43% with the CAC up a similar amount at 0.44%. German stocks were a little less ebullient and the DAX closed up just 0.19%.

In the US with 57 minutes to go before the close the S&P 500 is down almost 7 points or 0.47% to 1440. The Dow is off 0.41% while the NASDAQ is down 0.16%.

As noted above the Euro surged on the back of the German IFO but also some residual optimism after the Standard and poors upgrade of Greece we mentioned yesterday morning. Now, economically the mess in Europe is far from over – with unemployment, particularly youth unemployment as high as it is both in general and in the specific instances of Greece and Spain there are quite a few years yet for this mess to run. But for whatever reason, it could be as simple as crisis fatigue, traders and investors are moving on and the Euro crisis is, for the moment, not the number one thing on their minds. Indeed the performance of peripheral bond markets since the mid-year funk has been signalling this shift in sentiment and the Euro has recently been benefitting from it as well.

Crude oil has  satisfied the target I had been looking for recently with a move to $89.42 Bbl up 1.80% on the night and high at exactly the point I had expected as you can see in the chart below. A break of this level at $90.21 would open the way for another rally of $2 to $92.24 Bbl.

crude, crude oil, nymex crude, oil, crude oil price quote

Gold was down slightly overnight   at $1668 oz. but Silver was off 1.76% to $31.04 oz. I have had a target of $30.60 for a while so we’ll see how it goes there.

Lets have a look at some Meta 4 charts from my  AVATrade platform.

EUR/USD: Last night the Euro rallied up to a high of 1.3308 overnight and while it has pulled back to 1.3205 as I write it has still had a pretty good run over the past week or so. But the candlestick you can see in the chart above is a warning that perhaps some pullback is in the offing within the uptrend that is still targetting the mid 1.30’s as I have been saying recently.  $hour charts target a move to 1.3170/1.3184.

eur, eurusd, euro, euro (eur) price quote


The Australian dollar is down 0.40% on the past 24 hours and is looking for support probably around the 1.0450 region on the day and then we will see where it goes from there.:

aud, audusd, australian dollar, australian dollar price quote


New Zealand GDP will be big this morning particularly given what has been occurring for the NZD in the past day or so. China’s leading index will also be important in our time zone today. But the BoJ decision will be the highlight for the next 24 hours. In the US personal income and spending data and of course anything to do with the cliff will be watched.

Twitter: Greg McKenna

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