Fundamental Headlines

•Bernanke Prods Savers to Become Consumers –Bloomberg

•ECB Lends Banks $645 Billion, Exceeding Forecast –Bloomberg

•Confidence Boost from ECB Lending Fades –Reuters

•China Considers Letting Pensions Invest in Domestic Stocks –WSJ

•Doubts Arise in Euro’s Birthplace –WSJ

European Session Summary

Higher yielding currencies advanced slightly against the U.S. Dollar in the overnight, but data ahead of the North American trading session helped the Greenback take back some of its losses. A slew of American data at 13:30 GMT painted a cloudy picture as to where the United States’ economy is headed, weighing on risk-appetite. While labor market data beat expectations, the third quarter growth revision showed that the American economy grew at a 1.8 percent pace, versus the originally reported 2.5 percent estimate.

Today’s prints are a microcosm of the facts policymakers currently face: overall data is good, but it is not as strong as desired. As such, in the face of further growth uncertainty coupled with a slightly improving labor market, we expect the Federal Reserve to employ a neutral-to-dovish stance in the first periods of 2012, leaving open the door to further easing in the middle of the year should the Euro-zone crisis spill across the pond and drag under the American economy.

USD/CAD 5-minute Chart: December 22, 2011

Charts created usingStrategy Trader– Prepared by Christopher Vecchio

Overall, the commodity currencies, the Australian, Canadian, and New Zealand Dollars, remain the top performers on the day, with the Loonie leading the bunch at a 0.09 percent gain versus the U.S. Dollar. The weakest major on the day was the Swiss Franc, which comes as a bit of a surprise considering the Swiss government yesterday shot down the legality of negative interest rates, which would have allowed the Swiss National Bank to push to devalue the Franc futher.

Going forward, the final U. of Michigan confidence report for December is due shortly after the opening bell in New York. Confidence ticked up to 67.7 in December’s initial reading from 64.1 in November, and today’s revision should carry the gauge up to 68.0. A recent string of better-than-expected American data has lifted sentiment among consumers, but with oil holding near $100 per barrel, confidence is likely to remain capped in the periods ahead.

24-Hour Price Action

Key Levels: 14:05 GMT

Thus far, on Thursday, the Dow Jones FXCM Dollar Index is slightly lower, trading at 9979.25, at the time this report was written, after opening at 9980.04. The index has traded mostly lower, with the high at 9991.93 and the low at 9944.45.

--- Written by Christopher Vecchio, Currency Analyst

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