EUR/usd

The single currency continues fluctuating in a narrow range. While there is no news the euro holds close to 1.30 as market participants are unwilling to trade without new signals. The interview of the ECB's President Mario draghi to the FT and his yesterday's speech reaffirmed that the Bank refuses to make significant purchases of troubled countries' bonds, but at the same time is going to take certain measures to maintain the Eurozone's integrity. On the whole this should be perceived as readiness of strong regional economies to increase their contribution to the bailout of troubled countries in order to get a long-term benefit in the end. Improvement should ultimately mean an increase in competitiveness which may happen due to the drop in the living standards and currency devaluation. If PIIGS were separated, this would weaken their currencies pushing their devaluation potential up to 30%. Core countries, by contrast, are able to survive the growth of their currency exchange rates. But this will hardly be to the liking of export-oriented Germany. Moreover, it would be a serious blow to the overall business activity in Europe where capitals of so many countries are intertwined. Thus, the fact that Germany allocates money to rescue troubled countries should be regarded as mere pursuance of its own business interests. If the euro zone includes all 17 countries as it currently does, this will probably put pressure on the euro next year.

GBP/USD

The British currency has also stalled and has been trading around 1.55 already for six sessions in a row. It's worth mentioning that despite the correction of stock markets the pound is not going to lose ground to the euro. Generally the sterling is a currency with a higher beta which means that its fluctuations on the demand for risk are much higher than those of the euro. However, recent days stock markets have been undergoing a correction, but GBP/USD and GBP/JPY show an increase, albeit slight. In addition, the pound has been unexpectedly supported by data on consumer sentiment from Nationwide today. The index suddenly showed the growth from 36 to 40 against the expected fall to 34. UK consumers are happy with the fact that the peak of inflation is over and this somehow raises the public spirits. At present the uncertainty about the further direction of the currency' movement is very high, but the fact that the currency is now consolidated in a narrow corridor increases the possibility of a sharp movement in this or that direction. Will speculators be able to swing the cable in a thin market?

USD/JPY

Despite the yesterday's bearish mood in the stock markets, the yen has become weaker against the dollar. Once again the currency is close to the strong 78.0 level, which doesn't in the least want to give up. Markets lack an impulse. All the news coming out these days is already palling on bidders. Can Japan boast any bold policymakers nowadays? Are there any strong yen speculators left? It seems that the answer to both these questions will be “no” rather than “yes”.

AUD/USD

bears attacked the AUD/USD yesterday, throwing it off to 0.9880. Nevertheless, it is not far enough to discourage bulls from fighting for parity. Just like other currencies the aussie is trading very sluggishly due to the absence of fundamental news and the decline in volumes at the end of the year.  Forex markets will be almost empty at the end of December. For this reason, better trade inside the channel with close stops, but be ready to play the trend at the time of a strong movement.