Dollar Mixed in Thinning Activity, Dow 20,000 Watch Continues

<br /> Dollar Mixed in Thinning Activity, Dow 20,000 Watch Continues – Marc to Market<br />


The US dollar is
narrowly mixed as the holiday markets make
for light turnover.  Global equity markets are not
finding much encouragement from the new record highs by the Dow Jones

There have been
a few developments to note.
  First, the Swedish krona is the
strongest of the major currencies, rallying 0.7% against the dollar and
reaching a two-month high against the euro following the Riksbank meeting.
 The central bank extended its bond-buying
program through H1 17, but at a slower pace. 
It was a
controversial decision and could be the last efforts. 
 Two of the six-member
board wanted to stop the bond purchases now.  One other was interested in
extending the purchases, but at half the pace that was ultimately decided.  Currently, the Riksbank is buying
SEK45 bln of bonds (for H2 16). In the first half of next year, it will buy
SEK15 bln of conventional bonds and SEK15 bln of inflation-linked bonds.  It kept the deposit rate at minus 50
Second, the
European Court of Justice ruled that Spanish banks that overcharged for mortgages must offer compensation.
was a blow to Spanish banks, which fell in response to the final ruling.
 The preliminary ruling allowed a time-limit to claims for reimbursement,
but the final court ruling disallowed the constraint.  All Spanish banks
are not equally affected, and some banks
have put aside some of the funds.  
Still, financials are the worst
performing sector in Spain today. They are off nearly 1.75%  in late
morning turnover, while the Spanish market as a whole is off about 0.75%.
Italian banks are under modest pressure.
  The index of Italian banks is off
0.6% and is the sixth declining session of the past nine.   After the
cabinet approved increasing the country’s debt by 20 bln euro to help the
banks, both chambers of parliament will vote on measures today. For reasons
that seem to stem more from politics and economics, Italy has been slow to
address its banking system woes, and when it does move, it tends to be too
little.  There is no shock and awe or even a pretense of getting ahead of
the curve of expectations. 
Japanese shares
finished marginally lower.  
It has advanced for six consecutive weeks.  It is up
fractionally this week.  However, as it rallied, short interest has grown.
 As of last week,  at the Tokyo and Nagoya markets, the short
interest rose to JPY990 bln, a seven-year high.  
The dollar is
trading within yesterday’s ranges against the yen, showing little enthusiasm to
push back to last week’s highs near JPY118.65.  
Initial support is seen near JPY117.00 and then Monday’s low near JPY116.50.  
In Europe, the dollar is little changed against the euro, while sterling
continues to sport a heavy tone.  
There is an
interesting decision expected shortly from the European Court of Justice, with
implications for Brexit. 
 The Court will decide if a decision
on a free-trade agreement with Singapore requires individual country approval
or it is sufficient that the EU institutions approve.  If individual
country approval is needed, it would suggest that the UK will need to have all
individual EU members to ratify a new trade deal with the UK.  This could prove to be a laborious and
time-consuming process.  
continues to struggle to sustain even modest upticks
.  Consider that in the last 12
sessions, including today; sterling has
risen twice.  Near $1.2310, it has retraced 50% of the gains scored since
the flash crash.   The 61.8% retracement is close to $1.22.  On the
upside, $1.2420 needs to be overcome to begin repairing the technical damage.
For its part, the euro is straddling the $1.04 level.  The euro has not closed above its five-day moving
average since December 7.  It is found a little above $1.0410 today.
The US reports
November existing home sales.
  It is expected to be slightly softer
after a 2% gain in October.  This year, existing home sales averaged 5.42 mln (saar)
 compared with 5.23 mln monthly average last year and 4.92 mln in 2014.
  The US DOE also provides new oil inventory figures.  The API
estimate showed a large 4.15 mln barrel draw that supported prices.   The
Bloomberg survey median guesstimate is for a 2.4 mln barrel drawn, which would
be the fifth consecutive liquidation of stocks.   That said, supplies in
Cushing have risen for the last three weeks and may be more important for the
kneed jerk market reaction. 


Dollar Mixed in Thinning Activity, Dow 20,000 Watch Continues
Dollar Mixed in Thinning Activity, Dow 20,000 Watch Continues

Reviewed by Marc Chandler

December 21, 2016

Rating: 5

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