Daily Forex Forecast – 12 January
Major European indices declined slightly yesterday on signs that the impending slowdown facing Europe might not be as bad as previously thought. Strong data including better than expected German export data and French consumer confidence levels led financials higher as Unicredit’s rights offering rose over 30%. The Italian MIB ended higher 0.25% while the Dutch AEX and Swiss SMI both fell, ending down -1.22% and -0.71%.
Ratings agency Fitch mentioned a possible rating cut for Austria while maintaining the AAA rating for France and reiterating calls for stepped up asset purchases from the ECB. The Spanish and Italian bond auctions later today should provide more evidence of broader European economic health. Today’s major events include interest rate decisions from the Bank of England at 12:00 GMT and the European Central Bank at 12:45 GMT. Both rates are forecast to stay constant at 0.50% and 1.00% respectively.
Asian markets are trading lower today for the first time in four sessions as the Nikkei drops -0.85% and the Nifty is down -0.25%. The weakness in the Nikkei is driving the Yen slightly higher as USDJPY declines -0.0036% to 76.845. Stocks are lower on concerns over declines in exports and the “17 billion in debt issuance scheduled for today from Spain and Italy. Rate decisions are also a factor in the lower volume session as investor’s cautiously wait for the data to be released. Copper has declined on the weaker export data, falling 0.40% to 3.5245. This is leading AUDUSD below 1.0300, trading now around 1.0295 or down nearly -0.08%.
U.S. stocks ended the session mixed with the S&P 500 and Nasdaq advancing 0.03% and 0.31 while the Dow was marginally lower, down -0.10%. Banking and technology stocks were yesterday’s best performers as the possibility of Europe slipping into another recession weighed on markets.
The energy sector led markets lower as warmer temperatures in the U.S. pared needs for heating. Natural gas is trading down -1.30% to $2.738 while oil is slightly higher at $101.25 as rising tensions in the Middle East outweighed the substantial rise in oil inventories. The U.S. Treasury auction of 10-year notes recorded the lowest yield on record, 1.9%, amid rumors of a possible French downgrade.