Forexpros Weekly Wrap-Up 16 November 2012

November 16th, 2012
in contributors

Closing the Week with Forexpros

by Forexpros Staff

U.S. stocks finished higher on Friday, erasing earlier losses after lawmakers from both sides of the U.S. political divide expressed confidence they'll find a way to avoid a forexpros-logofast-approaching fiscal cliff.

At the close of U.S. trading, the Dow Jones Industrial Average rose 0.37%, the S&P 500 index was up 0.48%, while the Nasdaq Composite index was up 0.57%.

Follow up:

In Washington earlier, lawmakers met with President Barack Obama and expressed optimism afterwards that they will be able to steer the U.S. economy away from the fiscal cliff, a combination of tax hikes and spending cuts due to kick in at the same time early next year.

The nonpartisan Congressional Budget Office and private-sector economists have all forecast the U.S. to fall into a recession if policymakers fail to act and avoid the cliff.

Hopes U.S. policymakers will avert a fiscal disaster sent stocks rising albeit in choppy trading.

Elsewhere, U.S. industrial production fell unexpectedly in October, the Federal Reserve reported Friday.

Industrial production fell 0.4% following a gain of 0.2% in September, whose figure was revised down from 0.4%.

Analysts had expected industrial production to rise 0.2% in October.

Superstorm Sandy disrupted business for a good chunk of the northeastern U.S. last month, which reflected in the numbers.

A separate report showed that the U.S. capacity utilization rate declined to 77.8% in October from 78.2% in September, missing expectations for an increase to 78.3%.

Leading Dow Jones Industrial Average performers included Alcoa, up 1.61%, Home Depot, up 1.44%, and Unitedhealth Group, up 1.27%.  The Dow Jones Industrial Average's worst performers included Hewlett-Packard, down 1.76%, Wal-Mart Stores, down 1.00%, and AT&T, down 0.84%.

European indices, meanwhile, finished lower.  The eurozone's gross domestic product contracted 0.1% in the third quarter, following a contraction of 0.2% in the preceding quarter.  While the economy shrank less than market expectations for a 0.2% contraction, the data confirmed the currency group is in a recession.

After the close of European trade, the EURO STOXX 50 fell 1.40%, France's CAC 40 fell 1.21%, while Germany's DAX 30 finished down 1.32%. Meanwhile, in the U.K. the FTSE 100 fell 1.19%.

Forex

The dollar rose against the world's major global currencies on Friday after U.S. industrial production figures fell short of expectations and diminished demand for higher-yielding assets such as stocks.

In U.S. trading on Friday, EUR/USD was down 0.40% at 1.2730.

The nonpartisan Congressional Budget Office and private-sector economists have all forecast the U.S. to fall into a recession if policymakers fail to act and avoid the cliff.

Hopes U.S. policymakers will avert a fiscal disaster sparked some demand for risk though the trend was short lived, which kept dollar demand strong all day.  Lawmakers met with President Barack Obama and expressed optimism afterwards that they will be able to steer the U.S. economy away from the fiscal cliff, a combination of tax hikes and spending cuts due to kick in at the same time early next year.

Meanwhile, the euro and other higher-yielding currencies and asset classes came under pressure on reports that the eurozone's gross domestic product contracted 0.1% in the third quarter, following a contraction of 0.2% in the preceding quarter.

While the economy shrank less than market expectations for a 0.2% contraction, the data confirmed the currency group is in a recession.

The greenback was down against the pound, with GBP/USD trading up 0.10% at 1.5881.

The dollar was up against the yen, with USD/JPY trading up 0.13% at 81.27 and up against the Swiss franc, with USD/CHF trading up 0.45% at 0.9464.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD trading up 0.01% at 1.0011, AUD/USD up 0.07% at 1.0339 and NZD/USD trading up 0.19% at 0.8108.

The yen was generally weaker with sentiments in Japan that opposition leader Shinzo Abe may become the country's next prime minister working against the currency.  Shinzo has said he favors more monetary stimulus to jolt the Japanese economy.

The yen, meanwhile was down against the pound and up against the euro, with GBP/JPY up 0.20% and trading at 129.04 and EUR/JPY trading down 0.33% at 103.39.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.28% at 81.31.

Gold

Gold prices held steady in U.S. trading on Friday as investors viewed the asset as oversold and snapped up nicely priced positions, briefly sending the yellow metal into positive territory.

Market participants spent the week stocking up on dollars due to fears the U.S. may careen over a fiscal cliff at year end when taxes are set to rise and government spending cuts take effect.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 0.03% at USD1,713.35 a troy ounce, up from a session low of USD1,705.55 and down from a high of USD1,716.85 a troy ounce.

Gold futures were likely to test support at USD1,705.55 a troy ounce, the earlier low, and resistance at USD1,716.85, the earlier high.

Gold gained earlier amid an otherwise bearish session for the metal thanks to uncertainty surrounding the fiscal cliff in the U.S.

Democratic and Republican congressional leaders met with President Barack Obama earlier to discuss ways to avoid the cliff, and both sides emerged afterwards expressing optimism for a deal.

Gold and the dollar trade inversely from one another, and the greenback has firmed amid safe-haven demand in recent sessions over uncertainty surrounding the fiscal cliff.

Failure to prevent taxes from rising at the same spending cuts are due to take effect could send the U.S. into a recession next year.

Bottom fishing for the metal didn't last long due to weak U.S. and European indicators.

Elsewhere on the Comex, silver for December delivery was down 1.31% and trading at USD32.245 a troy ounce, while copper for December delivery was down 0.41% and trading at USD3.448 a pound.

Oil

Crude oil futures soared in U.S. trading on Friday after reports emerged Iran may be closer to developing weapons-grade uranium.

Clashes between Israeli security forces and Hamas militants pushed up prices as well on fears that fighting could aggravate tensions across the oil-rich Middle East and threaten supply.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD87.03 a barrel on Friday, up 1.35%, off from a session high of USD87.34 and up from an earlier session low of USD85.42.

An International Atomic Energy Agency report on Iran found that the country has installed centrifuges to further enrich uranium, Reuters reported earlier.

The news sent oil gaining as it comes at a time of escalating military campaigns between Israel and Hamas.


Fears that a regional military conflict remains a very possible threat sent prices soaring.

Meanwhile in the U.S., an oil platform fire that injured workers in the Gulf of Mexico kept prices up as well.

The U.S., however, is awash in supply, which capped the commodity's gains.

Markets brushed off weak economic news out of the U.S.

On the ICE Futures Exchange, Brent oil futures for January delivery were up 0.57% and trading at USD108.62 a barrel, up USD21.59 from its U.S. counterpart.









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