US dollar trying to make a stand against European majors
Frankfurt (Dec 3) The strong US ISM manufacturing survey yesterday saw the greenback pulling stronger across the board. USDJPY is within reach of the Abenomics-era high of 103.74 as US long yields are arching back higher as the odds of a December taper, or at least a December tip-off for a January, increase. The confrontation with China may also be playing a role. On that note, pondering the effect the confrontation is having on Abe’s domestic press freedom.
And whether we get a December or January taper (extremely high odds of a move at one of the two meetings, as long as data remains as robust as recent releases), what a way for Ben Bernanke to end his eight years at the Fed, with a tapering move after over five years of only ever moving in the direction of accommodation.
Remember that back in 2006, Bernanke’s first terms saw him presiding over a continuation of Alan Greenspan’s slow tightening of Fed policy with three further rate hikes in early 2006 before the whole financial system went over a cliff just 18 months later that was entirely unanticipated by either Greenspan, Bernanke, or Janet Yellen. Now we are likely to see Bernanke kicking off an unwinding of accommodation that puts Yellen in the driver’s seat on a tapering train that has already left the station. Will Yellen then continue the tapering only to see a new and equally dire denouement as the 2008 conflagration?
GBPUSD and economic data
Yesterday saw both strong UK and US manufacturing surveys, with the first seeing GBPUSD pulling to new highs for the cycle close to 1.6450 before the strong US ISM pulled the pair back down to earth. I would suspect from here that the progress higher will be very difficult for the pair if US data continues to surprise on the strong side. Consolidation back toward the 1.6250 is allowable for the pair within the overall context of the big breakout to multi-year highs, but the rally will look compromised if any sell-off cuts deeply through that key breakout level.
