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• Japan closed for holiday leading to very quiet Asia session
• Shanghai and Hang Seng close -4.5% and -2.5 respectively
• UK GDP revised to -0.6% sinks sterling to below 1.4800
• US housing and GDP key data on tap for the week
• Oil at $39/bbl
• Gold remains calm at $845/oz

Overnight Eco

• NZD GDP -0.4% vs. -0.5%
• AUD CB Leading Index -0.5% vs. -0.4% last
• EUR French Consumer Spending better at 0.3% vs. -0.1% forecast
• EUR Current Account improves markedly to -6.4B from -8.8B last as lower euro helps
• EUR Italian Retail Sales -0.3% vs. -0.4% called
• GBP Current Account improves to -7.7B from 11.9B expected
• GBP Final GDP -0.6% vs. -0.5% forecast
• GBP Index of Services contracted -0.2% vs. -0.6% called

Event Risk on Tap

• USD Final GDP expected at -0.5%
• USD Existing Home Sales expected at 4.90M
• USD New Home Sales expected at 420K
• USD Richmond Manufacturing Index expected at -40

Price Action

• USD/JPY flat lines at 9000 as Japan closed for holiday
• AUD/USD very quiet at 6850 as Asia remains still
• GBP/USD falls through 14800 as GDP worse than called
• EUR/USD slightly better bid makes a run to 1.4000 but pulls back as data supportive

With Japanese markets closed for Emperors birthday, currencies spent the night in  quiet pre-holiday trade essentially marking time until dealing desks close tomorrow evening  for the Christmas holiday. The euro made another run at the 1.4000 level boosted by better than expected French consumer spending and Current Account  data, but the rally fizzled into the early European session as traders continued to square up their books.      

On the economic front euro longs received ray of sunshine in the form of French consumer spending which increased 0.3% versus estimates of -0.1% contraction indicating that consumer demand in the region’ s 2nd largest economy may not be completely moribund. Additionally EZ Current Account data showed a marked improvement printing at -7.7B versus calls for a  much wider gap of -11.9B. No doubt the lower euro was a key contributor to the improvement in the data, but the harsh truth is that the EZ will now record a Current Account deficit for the year putting it in the same league as the US as far balance sheet issues are concerned.   

The news was not nearly as sunny in UK where GDP was revised further downward to -0.6% from -0.5% eyed and pushed cable below the 1.4800 level in mid-morning London trade.  With UK economy  showing no signs whatsoever of improvement,  market expectations of a full -100bp cut by BoE in January are sure to solidify making  the pound suffer on a relative basis for the time being. EURGBP appears  to have found a bit of resistance at the  9500 figure, but if UK data continues to disappoint  it could easily make another run on that level. We continue to believe that EURGBP is grossly overbought, but if  the cross takes out the 9600 barrier with conviction, hard as it is to imagine, it can target parity into the new year on sheer momentum alone, so any short stance on the pair should be taken with caution.   

Finally US calendar will wrap up for the week with Hosing and GDP data, none of which is likely to provide any boost for the dollar. If the revisions do surprise to the downside, EURUSD may well make another run at the 1.4000 figure, but overall we believe that this  level should cap most of the trading activity for the week.

We are off until the 5th of January and will not publish until then. To all our clients worldwide –Happy Holidays and the best of New Year.

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
USD	13:30	8:30	USD Final GDP	-0.5%	-0.5%
USD	15:00	10:00	USD Existing Home Sales	4.90M	4.98M
USD	15:00	10:00	USD New Home Sales	420K	433K
USD	15:00	10:00	USD Richmond Manufacturing Index	-40	-38

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.