More cautious for now

20 December, 2016

Overnight events have given the dollar a modest bid, with three events having occurred around the world seen as terrorist related. This follows on from the softer tone seen at the start of the week and represents a new dynamic for the market to contend with as volumes taper off into the end of the year. We also had some bullish comments from Yellen last night around the jobs market which also supported the dollar at the margins. For USDJPY, this has allowed a reversal back towards the 118.00 level, but we remain short of the recent highs at 118.66 and for now, that will be the level to watch in terms of whether this is going to be a more sustained dollar rally. There were no changes to policy at their last meeting of the year, with a marginal upgrade to their outlook for the economy.

For today, the data calendar is on the light side, so we’re likely to see markets winding down into year end, but with a hint of risk aversion. Note that stocks were largely range bound yesterday after the firmer tone seen in the US, whilst the Eurostoxx flat-lined through the trading session on Monday. We’re looking to a marginally weaker start today.

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