EUR/usd
The slight concession from Boehner inspired the currency markets on Friday. eurusd was soaring up during the US session and grew on triggering stop orders this morning. The latest maximum hit by the pair is 1.3187. Yet since then the euro has slightly rolled back on the retracement of Asian markets and is now trading close to 1.3150. Possibly, the bulls' efforts were not vain -the pair rose to its 7-month highs, which opens the way up to 1.3280, the starting level of the May sale. Despite the general optimism, Boehner's concession is just the first step on a long road. The republicans agreed to raise taxes for those who earn more than a million a year. The democrats wanted to impose higher taxes on everybody whose income exceeds 250K. Many believe that the parties will meet halfway, i.e. at 500-750K. Obama would be glad to see it this week, before Christmas, so the next 5 days will be very important and unnerving for the markets. Nouriel Roubini, the famed New York University economist also known as “Dr Doom”, pours oil on the flames as well. He believes that the USA is on the verge of falling from the fiscal cliff. But in his opinion, there's no need to be afraid, since the market reaction to that (apparently a steep drop) will put the politicians on the right track. There are few doubts that this scenario will be able to unfold since in the recent years we've seen it many times. Yet we hope that the politicians have learnt the previous lessons from the markets and will take action in due time as it will allow to minimize the efforts taken. Roubini's forecasts speak about the risk, but we don't agree with them and believe that the euro will keep growing and probably will have got to 1.33-1.34 by the end of the year.
GBP/USD
The pound's reaction to the growing optimism was not immediate. On Friday the sterling was appreciating against the dollar much slower than the euro. However, the most important thing has been already done: gbpusd has hit a new high and has risen to 1.6170. The next target is 1.6260 and it seems that today the sterling will keep up with the euro, as since morning it has felt quite good, having grown already to 1.6180. Tuesday will be an important day for the sterling due to the release of inflation stats (CPI, PPI, HPI). So far the sterling has felt much better than was expected judging by its fundamental indicators.
USD/JPY
No surprises from Japan. Abe has won, the yen has tumbled down with a gap against all the currencies. The week was opened above 84.30 against the last week's close of 83.50. This gap hasn't been covered yet. It's quite likely that it will remain uncovered till December 20, when the BOJ publishes its decision on the monetary policy. Now very many expect further steps towards active printing of money. The problem is that the loans, offered by the BOJ, aren't popular with the banks. Analysts expect that now the Bank will start issuing them to corporations.
AUD/USD
The weakness of the yen should be favourable for the aussie as an anti-currency. However, it is clearly observed only in AUDJPY. AUD is depreciating against its American counterpart, given back all the Friday gains. As we see, having approached the upper bound of the channel (1.02-1.06), the Aussie finds it more and more difficult to hit new highs. The markets seem to realize that the monetary policy of the Australian CB is too soft. Besides, the new trust in the euro partly deprives the Aussie of demand, coming from the national wealth funds.
