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Euro: The Focus Remains on Greece, But Other Worries Seeping In

Euro traders had shifted focus to next week well before Friday’s session even came online. However, there were more than a few important updates that we should keep in mind for future reference. Following up on the ECB’s critical downgrade of 2013 GDP (0.5 percent growth to 0.3 percent contraction) and CPI, the Bundesbank downgraded Germany’s growth outlook for the same period sharply (1.6 to 0.4 percent growth). Ratings Agency Standard & Poor’s downgraded its own view of Italy’s future and warned it could spell a downgrade. Most interesting though was the overlooked statement that Portugal’s Prime Minister said he may seek ‘equal treatment’ in bailout terms (to Greece). Given how difficult it is to squeeze out further support for one EZ member, that could be a serious point of contention. Speaking of Greece, the EU’s meeting after the country’s bond buyback effort is completed is on tap. A payout is already expected; so don’t assume it is an automatic bullish catalyst.

Japanese Yen Looking Fundamentally Oversold at 9-Month Lows

Following two months of broad selling, the Japanese yen is looking extended. The funding currency is at 8 and 9 month lows against most of its counterparts which is commensurate with the position of equity indexes (carry interest has a positive correlation to risk appetite). However, sentiment is constantly questioned, and the funding currency is notorious for showing strength despite risk appetites. Much of the recent yen depreciation has been a factor of policy officials’ warnings. Those threats are fully absorbed and now we await the December 16 election.

British Pound Keys in on Short-Term Volatility Via Data

The sterling doesn’t have enough fundamental weight to develop its own lasting trends owing to its relatively moderate economic slump, stimulus effort and positioning on the risk spectrum. That is good as it fits the bigger picture where the markets are struggling to build market-wide momentum behind critical fundamental themes. Therefore, sterling traders can focus on ranges and volatility surrounding particular event risk. Sympathy moves to Euro crisis progress and a risk response to the Fed should be expected, but unique to the pound will be the UK jobs data.

Canadian Dollar Rally Falters Quickly Despite Strong Jobs Figures

Most traders were watching the US docket for the release of the NFPs. That distraction diverted attention from a far more intriguing and dependable release: the Canadian labor data. According to Stats Canada, the economy added a remarkable 59,300 jobs in November – the most since March. The unemployment rate would also drop 0.2 percentage points to 7.2 percent. The most remarkable aspect of this data though was it didn’t have a questionable participation adjustment (like the US). Yet, despite this strength, the loonie’s strength was fleeting.

Swiss Franc: An Unexpected SNB Move Could Make EURCHF Lift Permanent

The rally for EURCHF from the SNB-imposed floor at 1.2000 since early September doesn’t seem to have encouraged the central bank to lighten its load of FX reserves. The group reported its holdings held steady at 424.8 billion francs. This is perhaps an effort not to undermine the key pair’s growth-supporting progress. Yet, EURCHF is once again pulling back. Will the SNB act Thursday to reinforce itsadvance?

Gold Bulls Sounding Off on Fed Stimulus Impact

With Friday’s close, gold would close lower on the week; but there was certainly no trend in the underlying performance. The metal is still anchored around the 1700 level (trading for a 15th month between the broader 1800 – 1525 range). It is difficult for the metal to catch traction either way with the dollar lacking commitment and the general effort to undermine fiat assets easing. Some bulls are thinking that latter push will resume this coming week with the Fed decision. Would an increase in stimulus lift gold’s value? Why isn’t it already rising if it’s expected…

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

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--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

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