Instraday Market Thoughts

Fiscal Cliff Does it Again

by Adam Button
Dec 27, 2012 23:58

The fiscal cliff spooked markets Thursday after Senate leader Reid predicted the US would go over the ledge. The comments undercut a euro rally but it was still the top performer; the yen lagged. The yen will remain in focus with a series of Japanese data points upcoming including unemployment, retail sales and industrial production.

Reid said it looks like the US is headed over the fiscal cliff because there isn’t enough time to reach a deal. The House will resume sitting on Sunday but optimism for a true deal is next-to-nil. It is increasingly likely that any deal will be a short-term fix.

The euro immediately dropped a half cent after the remarks from Reid. The pound dropped to 1.6060 from as high as 1.6200 earlier in the session as sentiment deteriorated.

Economic news also weighed as the market frets about reports of soft holiday spending. December consumer confidence fell to 65.1 compared to 70.0 expected.

There were positive signs, however, with new home sales rising to the highest since April 2010. Initial jobless claims also improved to 350K compared to the 360K consensus.

The upcoming session features a round of tier 1 data from Japan. It begins at 2330 GMT with CPI and unemployment. It’s followed by industrial production and retail sales at 2350 GMT. Lean toward industrial production as the key metric but a low CPI print could also spark speculation about further BOJ intervention.

Act Exp Prev GMT
CB Consumer Confidence (NOV)
65.1 70.3 71.5 Dec 27 15:00
New Home Sales Change (OCT) (m/m)
4.4% -3.5% Dec 27 15:00
New Home Sales (NOV) (m/m)
0.377M 0.378M 0.361M Dec 27 15:00
Tokyo CPI ex Fresh Food (DEC) (y/y)
-0.6% -0.5% -0.5% Dec 27 23:30
National CPI Ex Food, Energy (NOV) (y/y)
-0.6% -0.5% Dec 27 23:30
National CPI Ex-Fresh Food (NOV) (y/y)
-0.1% -0.1% 0.0% Dec 27 23:30
National CPI (NOV) (y/y)
-0.2% -0.4% Dec 27 23:30
Tokyo CPI (DEC) (y/y)
-0.6% -0.5% Dec 27 23:30
Pending Home Sales (m/m)
-0.3% 5.2% Dec 28 15:00
 
 

Latest IMTs