Global Themes

The trade-weighted U.S. dollar index is again looking like a ‘freight train rolling’ with very little getting in its way ahead of Tuesday’s U.S. quarterly growth revision. The dollar index is now less than half a percent away from breaking the 100-mark barrier and reclaiming 12-year highs. With geopolitical risks in the euro zone rising and commodity prices plunging further, the prospect of further monetary easing from the European Central Bank (ECB) next week is increasing, weighing on the euro. There is a risk of EUR/USD dropping further towards a 12-year lows hit in March. Sterling is also sliding against the U.S. dollar and is trading just 0.8 percent away from seven-month lows ahead of Wednesday’s Autumn Statement from Britain. Canada’s dollar also succumbed to fresh momentum behind its U.S. rival, nearing recent 11-year lows.

EUR

With geo-political risks in the Euro Zone rising, and commodity prices plunging further, the prospect of further monetary easing from the European Central Bank (ECB) next week is increasing. A vulnerable Euro has subsequently fallen through another key price level against the US dollar, touching a new seven-month low. Unless top tier Euro Zone economic data over the coming days offers any relief there is a risk of EUR/USD dropping further towards $1.05-1.04.

GBP

Sterling is sliding against the US dollar, and is trading just 0.8 percent away from seven-month lows ($1.5023) ahead of Wednesday’s Autumn Statement. Friday’s data on UK government borrowing recorded the worst deficit for any October since 2009. The data was a blow for Chancellor George Osborne ahead of this week’s Government Spending Review which provides an update to investors on how much fiscal austerity will negatively impact the UK economy.

USD

The US dollar’s trade-weighted index is again looking like a ‘freight-train-rolling’ with very little getting in its way currently. The index is now less than half a percent away from reaching a 12-year high and breaking the 100 mark barrier. Overnight commodity prices plunged yet again, taking the global commodities index to a 2002 low and adding to USD strength. Safe haven demand related to Brussels and Paris is adding to the dollar’s haven allure.

JPY

Thursday’s Japanese inflation print for October is expected to remain negative, pushed down by further falls in energy prices. The Bank of Japan makes its next rate decision on December 18 but is yet to signal any strong hints about more monetary easing. Therefore Yen weakness remains somewhat limited, with the Yen boosted further amid safe haven demand.