Market Overview 2017-12-27
As the FX markets reopened on Boxing Day, liquidity and consequently the trading in currencies was significantly reduced, as many institutional traders at major banks and funds remained out of the markets, or on holiday. Many currency pairs experienced whipsawing conditions during the trading sessions, which provided both challenging conditions and opportunities for many retail FX day traders. Certain global stock markets were also closed, therefore the impact of any significant economic calendar news proved to be benign. For example, the news circulating that USA shoppers may have generated their best shopping figures in over a decade, did little to boost U.S. equity markets, despite the underpinning revelation that confidence must be high in the USA, for consumers to take on more debt and spend.
Perhaps wealthier Americans are also spending their 2018 tax refund in advance. The most prominent bullish currency mover throughout the day was the Canadian dollar, the reaction of the commodity currency presumably came as a consequence of oil producers citing an increase in demand and supply over the coming years. In terms of USA economic calendar news the Case Shiller 20 city composite house price index revealed a rise of 6.38% YoY, whilst the MoM figure showed a 0.7% rise. The Dallas manufacturing index smashed the forecast of 20, by coming in at 29.7, suggesting that the tropical storm devastation witnessed in the state earlier in the year, has now receded. The DJIA and SPX closed the day down (but close to flat), whilst Europe’s equity markets were closed. However, one economic release that did appear to effect FX markets was the latest Japanese CPI figure, revealing that inflation has risen by 0.9% YoY and 1% in Tokyo. Consumer spending has also risen considerably, beating the forecast of 0.5% by some distance, by coming in at 1.7% annually.
These encouraging figures, suggesting that the BOJ is beginning to witness the benefits of its monetary policy and that the wider economy is seeing the benefits of the government’s fiscal policy, encouraged traders to bid up the value of yen versus the dollar. USD/JPY fell by circa 1% on the day and through the third level of support. The yen rise, versus its other peers, was tempered by the publication of the latest dovish monetary policy minutes from the BOJ, which revealed that the central bank is still committed to its loose monetary policy programme. With European equity markets closed for Boxing Day and no Brexit news, the U.K. pound sterling selling pressure and whipsawed price action, was entirely due to other issues and the lack of trading volume and liquidity, which may have been responsible for the flash crash of the euro experienced over the last 24hrs which saw EUR/USD collapse by circa 3% at one stage during the proceedings.