Forexpros Weekly Wrap-Up 30 November 2012

Closing the Week with Forexpros

by Forexpros Staff

U.S. stocks finished mixed on Friday on fears lawmakers are making no progress in talks to steer the U.S. economy away from a fast-approaching fiscal cliff.  At the close of U.S. trading, the Dow Jones Industrial Average rose 0.03%, the S&P 500 index was up 0.02%, while the Nasdaq Composite index fell 0.06%.

Investors avoided stocks on Friday after House Speak John Boehner, an Ohio Republican, lamented that talks on fiscal reforms with Democrats in the Senate and White House were going “almost nowhere.”

The fiscal cliff, a combination of rising taxes and cuts to government spending converging at the close of this year, could tip the U.S. into a recession next year if Congress fails to steer the economy away from it.

Soft data watered down stock prices as well.  The Chicago purchasing managers’ index hit 50.4 in November, up from 49.9 in the previous month but short of market calls for a gain to 50.5.  Still, a reading over 50 signifies an expanding economy.

Separately, government data revealed that U.S. personal spending decreased unexpectedly in October, ticking down 0.2% after a 0.8% rise the previous month.  Analysts had expected personal spending to rise 0.2% in October.

U.S. personal income was flat last month, disappointing expectations for a 0.2% gain following a 0.4% increase in September.

The session wasn’t totally void of optimism.

Earlier in Europe, Germany’s parliament approved an E.U.-I.M.F. accord for Greece to cut its debt to 124% of gross domestic product by 2020, which clears a hurdle and frees up EUR44 billion to flow into the country’s coffers in installments to avoid default for now.

Elsewhere, European Central Bank President Mario Draghi said earlier that the eurozone economy should begin recovering in the second half of 2013.

Leading Dow Jones Industrial Average performers included Wal-Mart Stores, up 1.65%, Home Depot, up 1.34%, and Johnson & Johnson, up 0.77%.

The Dow Jones Industrial Average’s worst performers included Microsoft, down 1.26%, Caterpillar, down 1.15%, and Merck, down 0.94%.

European indices, meanwhile, finished mixed to lower.  After the close of European trade, the EURO STOXX 50 fell 0.25%, France’s CAC 40 fell 0.33%, while Germany’s DAX 30 finished up 0.06%. Meanwhile, in the U.K. the FTSE 100 rose 0.06%.

Forex

The dollar traded lower against the world’s major global currencies on Friday after Germany approved a multilateral lending deal for Greece.

Fears talks to steer the U.S. away from its fiscal cliff suppressed appetite for risk-on assets and sparked dollar demand, which trimmed the greenback’s earlier losses.

In U.S. trading on Friday, EUR/USD was up 0.18% at 1.3003.

E.U. and I.M.F. officials agreed on a proposal for Greece to cut its debt to 124% of gross domestic product by 2020 in exchange for fresh aid payments.

Germany’s parliament on Friday gave the accord the green light, which clears a hurdle and frees up EUR44 billion to flow into the country’s coffers in installments to avoid default for now.

Elsewhere, European Central Bank President Mario Draghi’s said earlier that the eurozone economy should begin recovering in the second half of 2013.

Investors largely shrugged off soft U.S. and European data.

Germany revealed earlier that the country’s retail sales contracted 2.8% in October from September, outpacing market calls for a 0.2% decline and falling well short of a 0.5% rise in September.

Elsewhere in Europe, the eurozone consumer price index fell more than expected in November, coming in at an annualize rate of 2.2% from 2.5% in October.

Analysts had expected a 2.4% reading in November.

Meanwhile, the unemployment rate for eurozone rose to a record high 11.7% in October from 11.6% the previous month, in line with expectations.

The dollar, meanwhile, saw some safe-haven demand in wake of disappointing output data in the U.S.  Demand for the dollar rose further on Friday after hopes for a prompt solution to avoid the fiscal cliff looked unlikely after House Speak John Boehner, an Ohio Republican, lamented that talks on fiscal reforms with Democrats in the Senate and White House were going “almost nowhere.”

The fiscal cliff, a combination of rising taxes and cuts to government spending converging at the close of this year, could tip the U.S. into a recession next year if Congress fails to steer the economy away from it.

Meanwhile, the greenback was up against the pound, with GBP/USD trading down 0.09% at 1.6026.

The dollar was up against the yen, with USD/JPY trading up 0.34% at 82.40 and down against the Swiss franc, with USD/CHF trading down 0.06% at 0.9268.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD trading up 0.09% at 0.9929, AUD/USD down 0.02% at 1.0433 and NZD/USD trading down 0.26% at 0.8207.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.06% at 80.14.

Gold

Gold prices fell in U.S. trading on Friday after U.S. Speaker of the House John Boehner said talks with Democrats on avoiding the fiscal cliff were lacking progress, which wiped out demand for risk and sparked safe-haven dollar demand.

The fiscal cliff, a combination of rising taxes and cuts to government spending converging at the close of this year, could tip the U.S. into a recession next year if Congress fails to steer the economy away from it.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 1.00% at USD1,712.15 a troy ounce, up from a session low of USD1,710.45 and down from a high of USD1,733.65 a troy ounce.

Gold futures were likely to test support at USD1,708.35 a troy ounce, Wednesday’s low, and resistance at USD1,733.65, an earlier high.

Demand for gold evaporated on Friday after hopes for a prompt solution to avoid the fiscal cliff looked unlikely after House Speak John Boehner, an Ohio Republican, lamented that talks on fiscal reforms with the Democratically controlled Senate and White House were going “almost nowhere.”

Sticking points involve tax hikes, with Republicans opposed to Democratic calls to let tax breaks expire for the wealthy to drum up government revenue to narrow deficits.

Republicans say such a proposal, especially without accompanying spending cuts, will hurt small business owners and hamper plans to expand and hire.

While energy and other commodities markets brushed off the news in mid-session U.S. trading on Friday, investors sold gold on anticipation of a rush for the dollar to follow suit, especially in light of soft economic indicators hitting the wire earlier.

Elsewhere on the Comex, silver for March delivery was down 3.05% and trading at USD33.380 a troy ounce, while copper for March delivery was up 1.05% and trading at USD3.643 a pound.

Oil

Crude oil futures rose in U.S. trading on Friday amid optimism lawmakers will eventually steer the economy away from a year-end fiscal cliff, a combination of tax hikes and spending cuts taking effect at the same time and tipping the economy into recession.

Investors shrugged off soft U.S. data.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD88.62 a barrel on Friday, up 0.62%, off from a session high of USD88.78 and up from an earlier session low of USD87.48.

Energy market participants on Friday kept faith lawmakers will steer the country away from the cliff despite concerns voiced by House Speak John Boehner, an Ohio Republican, who lamented talks on the matter with the Democratically controlled Senate and White House were going “almost nowhere.”

Oil also saw support after Germany approved a deal that will free up aid for Greece.

Oil continued to see demand in wake of a Commerce Department report earlier this week that revealed the U.S. gross domestic product grew an annual 2.7% in the third quarter, up from an initial estimate of 2%.

On the ICE Futures Exchange, Brent oil futures for January delivery were up 0.24% and trading at USD111.03 a barrel, up USD22.41from its U.S. counterpart.