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Bitcoin plunges by $3000. US steady, EUR mixed after Catalonian elections, AUD nudges higher yet again

By Nick Parsons

Given the one story which has dominated financial markets for the last few months, we can’t resist reporting that the US Dollar yesterday rose against Bitcoin to end the day at USD/XBT0.0000649. Overnight, it has rallied further, to XBT0.0000714. Quoting the pair the more familiar way around, the US Dollar value of Bitcoin has fallen over the past 24 hours from $16,250 to $13,870 (having touched a low of $13,170) and is down almost $5,000 since this time on Tuesday morning. Still, however, there are people who insist on calling it a currency…

Against the more traditional currencies which can actually be used for those dull things such as the payment of goods and services, the USD on Thursday was either unchanged (EUR and GBP) or lower (NZD, AUD and CAD). It’s index against a basket of major traded currencies slipped very slightly to end at 92.83; the lowest since December 5th.

There’s plenty still for the US statisticians to report on before their Christmas break begins. Today brings not only durable goods orders, new home sales and the Michigan survey of consumer sentiment, but also the monthly personal income and expenditure numbers as well as the much-watched (and Fed targeted) PCE deflators. The US Dollar index opens in North America this Friday morning at 92.92 but where it finishes in extremely illiquid market conditions in New York this afternoon is anyone’s guess.

We’ll be back with our next commentary on December 26th so until then we wish all our clients in the US and Canada a very Merry Christmas and happy holidays.

 

 

The Canadian Dollar exploded higher on Thursday after an extremely strong set of economic data on CPI and retail sales. By the end of the day, it was way out at the top of the FX leader board, rising 0.5% against the AUD and more than 1% against all the other major currencies we track here.

The Bank of Canada has a 2% target for CPI and in October it predicted it would average 1.4% in the final three months of 2017. Policy makers didn’t expect a sustained return to 2% inflation until the end of next year. Instead, CPI inflation accelerated to 2.1% y/y in November from 1.4% in October. While the jump was due to a surge in gasoline prices (up 19.6% y/y), the increases went beyond energy. Prices were up in seven of the eight major CPI components in the 12 months to November, with the transportation and shelter indexes contributing the most to the increase.

We don’t yet know the impact of these higher prices on consumers expenditure but the October retail sales figures also released yesterday showed plenty of forward momentum. Statistics Canada reported retail sales rose 1.5% to $49.9 billion in October. Higher sales at new car dealers were the main contributor to the gain. Excluding sales at motor vehicle and parts dealers, retail sales increased 0.8%. Sales were up in 7 of 11 subsectors, representing 79% of retail trade. After removing the effects of price changes, retail sales in volume terms increased 1.4%.

The Canadian Dollar opens in North America today at USD1.2720 with GBP/CAD at 1.7025 and AUD/CAD at 0.9815. We still await the monthly GDP numbers for October, to be released this this morning, before we can all go home and wrap some presents. Merry Christmas everyone!

 

 

The euro was pretty much side-lined on Thursday with no economic data in the Eurozone, and politicians keenly watching elections as the Spanish region of Catalonia went to the polls. The election was called by the Spanish prime minister, Mariano Rajoy, at the end of October when the central government took control of Catalonia and sacked the regional government after it staged an illegal referendum and made a unilateral declaration of independence. EUR/USD traded down steadily but not dramatically during the day from an early high of USD1.1885 to a close around 1.1860.

To say the least, the election results are complicated to interpret so please bear with us. Pro-independence parties secured 48 per cent of votes, against 52 per cent for parties that oppose independence but the majority of seats actually went to the supporters of independence. Citizens, the centre-right unionist party, came top, with 25 per cent of the vote, which translated to 37 seats out of the 135 in the regional parliament. The leading separatist party was Carles Puigdemont’s Together for Catalonia, with 34 seats, the Catalan Republican Left (ERC) took 32 and the far-left, anti-capitalist Popular Unity Candidacy took four. The Catalan Socialist party took 17 seats, while Catalunya en Comú-Podem – the Catalan version of the anti-austerity Podemos party – took eight. Trailing them was the Catalan branch of Spain’s ruling People’s party, which won four seats – seven fewer than in the last election two years ago.

If it’s not immediately clear who won, it is very clear who lost: Spanish Prime Minister Mariano Rajoy. He had banked on the election securing a return to “legality and normality”, but now faces the challenge of having to deal with separatists returning to power in Barcelona. Late last night, a jubilant Carles Puigdemont spoke from exile in Brussels calling the results “a victory for the Catalan Republic”.

How all this plays out in the foreign exchange market remains to be seen. For the moment, the EUR is around the midpoint of its overnight range and opens in North America this morning at USD1.1850 and CAD1.5070.

 

 

The British Pound has had a mixed session; little changed against the USD and NZD, up against the USD but down against both the Australian and Canadian Dollars. Volumes haven’t been great and in all honesty, enthusiasm has been even less so.

This last trading day before the Christmas holidays can make currencies susceptible to wider than usual swings for little apparent reason. Dealers don’t want to hold positions over a four-day holiday and moving what in normal conditions is a relatively small amount in a trillion dollar per day market can feel at times like a game of pass the parcel. We saw yesterday, for example, some huge swings in the value of the Canadian Dollar on better than expected economic data, and one of the three major time zones for foreign exchange trading has already turned off the lights in the office and gone home.

In the UK, the number-crunchers at the Office for National Statistics released their last pieces of data before the holidays. The second revision to Q3 GDP numbers left the quarterly rate unchanged at 0.4% but the quarterly number for Q4 2016 was shifted up a couple of tenths which means the annual rate of growth in the UK economy is now 1.7% rather than the 1.5% which had been expected. The ONS said that households have paid out more money than they received for four consecutive quarters, the first time that’s happened since records began in 1987.

The pound opens in North America this Friday morning at USD1.3370, EUR1.1280 and AUD1.7315.

 

 

On nearly any other day, the Aussie Dollar’s performance would have put it top of the pile in the FX universe, but the very sharp rally in the Canadian Dollar pushed the AUD into second place on Thursday. The AUD was bid right from the start of the European session and as dealing books were handed over to New York, AUD/USD reached 77 US cents for the first time since way back on November 2nd. In London this morning it reached a high of 0.7719.

The number crunchers at the Australian Bureau of Statistics sensibly closed for the holiday season at midday yesterday and there will be no data releases at least until it re-opens on January 2nd. We’ll leave the final words of this commentary to the ABS who noted earlier this week that, “Santa will be busy this Christmas visiting the 2 million Australian families with children under the age of 12. The 2016 Census shows that most children live in New South Wales (1.2 million), Victoria (947,408) and Queensland (795,908).

While the ABS doesn't record official reindeer numbers, the Census recorded 35 deer farmers in Australia who we’re sure could help Santa should any of his deer get tired.”

The AUD opens in North America this morning at USD0.7718 with AUD/NZD at 1.1000 and AUD/CAD0.9810.

 

 

Just as the Aussie Dollar got back on to a new big figure against the US Dollar yesterday, so too the Kiwi Dollar spent nearly the entire day back on 70 cents with only a very brief dip down to 0.6990 around 11am London time which was quickly reversed.

Q3 GDP figures were pretty much in line with the market consensus of +0.6% q/q and very much helped by upward revisions to back data. Statistics New Zealand revised up its GDP figures, raising 2015 growth to 3.6 percent from 2.4 percent and 2016 to 4 percent from 3 percent. Against this, the RBNZ’s last Monetary Policy Statement assumed a +0.7% quarterly increase so a slight miss relative to their forecast reinforced expectations that interest rates will be on hold until at least 2019. This helps explain why NZD/USD still hasn’t broken Monday’s 2-month high of 0.9027.

The New Zealand Dollar opens in North America this morning at 0.7017 with NZD/CAD at 0.8915.