Greenback takes a breather

Preliminary jobless claims fell yet again as had been expected and the 4-week average result sustained in its downtrend. The Philadelphia Fed manufacturing survey rose above consensus predictions, which indicates that the ongoing increase in activity is occurring at a faster rate than economists are predicting. On the less positive side, housing starts were up, though not as high as anticipated, and building permits came in weaker. The US Congress though, gave final approval to extending the expiring Bush-era tax cuts. On the whole, news and data were deemed good news for equities and US indices advanced and the Dollar came off. Markets were relatively quiet in Asian trading with no noteworthy news or data.

All focus now shifts to Europe and more specifically the 2nd day of the EU leaders summit. Given that the first day yielded few surprises, expectations are not high that anything concrete will emerge. A general round of Eurozone/Euro supportive comments seems likely but with anything more tangible requiring amendments to the existing Treaty which in turn would require national referendums (no government is in a secure enough political position to risk incurring their people’s wrath), the status quo looks likely to be maintained. Spain managed to get their 10 and 15-year bond offerings away yesterday but at a greatly increased cost and this morning we have seen Moody’s play catch up with the other two ratings agencies by downgrading Ireland having placed Greece and Belgium’s ratings under review. With the ECB having finally concluded their capital increase to ensure their ability to raise lots of money quickly, news from the peripheral states is unlikely to improve over the coming weeks. Having said that, Ireland did report a positive 3rd Quarter GDP figure yesterday at +0.5% with a strong export performance countering weak domestic demand. GNP, which is seen by some economists as a more accurate indicator of the state of the economy, jumped 1.1 %, beating expectations for a 0.2 % increase.

Today’s data calendar is already old news with the UK’s Nationwide consumer confidence figure reported at 45 versus 52 in October, down to a 21-month low (which knocked Sterling a tad lower across the board) and the German IFO survey result also out, with numbers slightly better all round – no effect on the Euro exchange rate so far. All that’s left is the US leading indicators number this afternoon – a largely forgotten piece of data and unlikely to cause a ripple in the pre-weekend market.