US Dollar Holds Gains vs EUR Post Data, CHF Weakens Today, AUD Above Parity 1. USD Holds NY Gains Following Spending, Orders and Jobs Data The US released several reports on the economy today, measure of consumer spending and incomes, weekly jobless claims, and durable goods orders. Here's a breakdown of the 3 reports: Personal spending rose 0.4% in November, a tad under expectations, but still a strong reading, showing continued strong growth in the consumer spending sector for the middle month in the 4th quarter. We also have an interesting revision, in the the first month of hte 4th quarter, October was revised higher to show a 0.7% increase in spending, when the previous release showed spending up 0.4%. Personal income increased $42.3 billion, or 0.3 percent, matching expectations. The headline reading for Durable Goods Orders came in below expectations, declining 1.3% for the November period when forecasts had called for a smaller 0.6% decline. Looking deeper into the data, core durable goods orders – which exclude transportation items – rose 2.4%, and October's figure was revised upwards. Weekly Jobless claims remain around the 420K level, 3K below the previous week's 423K figure. It would be nice to see this indicator fall below the 400K level, but at least its remaining near its recent 2-year lows. While the durable goods orders data was a bit disappointing, the core figure showed good demand as it was the best since March. Jobless claims continue to remain low, which should usher in better labor market data – and presumably a better December Non Farm Payroll report We saw that October was a good month, with personal spending at its best in a year. November's figure, while not matching the pace in October, should still signal that the consumer spending sector will continue to add to economic growth. Today's data therefore likely adds positively to the US recovery story, or at least doesn't alter the story line much. The US Dollar Index was higher prior to the data – breaking above 81.0 which coincided with the EUR/USD breaking below 1.3080. Following the US data, the US Index was still holding above that 81 level, and the USD maintained its gains that it got prior to the release. 2. Swiss Francs Recedes Today, Some Profit Taking? The impressive run of late of the Swiss Franc, or Swissy, took a breather today as we saw the USD/CHF and the EUR/CHF both reverse course after setting important lows. The EUR/CHF bounced up off the 1.2440 level, and was unable to test that level in today's session. We climbed up to 1.2573. The USD/CHF meanwhile, after breaking below support at 0.9560, we found a new near term bottom at 0.9495. We moved back up to 0.9610 in the NY morning trading session. We are heading into the Christmas holiday and this could be some profit taking for the Swiss bulls out there, some position squaring. There wasn't too much in the way of developments on the Euro-zone front. The EUR continues to be on the back foot against the USD on sovereign debt concerns. 3. Stronger US Recovery Helps Carry Trade Pairs Like AUD/USD A stronger US recovery can help the USD against the EUR and GBP. Against the EUR because of the sovereign debt mess and against the GBP because of UK's (and UK's banks) exposure to the European troubles as well as the worries about the upcoming austerity measures that will crimp aggregate demand in the UK. However, if we look at our higher yielding, commodity linked currencies, then an improving US economy may work against the USD. The AUD/USD for instance is a good choice for carry trade, as major financial institutions can borrow in low-rate USD and park the money in higher yielding AUD assets. It's our classic “risk-on/risk-off” trade modes that we had grown accustomed to for the better part of 2010. If investors are more confident about the US economy and about the global economy, then they are more inclined to take the risk to seek higher yields abroad. The AUD/USD had been king of the carry trade during 2010 and wants to end the year that way as well, testing the area above parity in today's session. 4. Kiwi Pressured by Weak GDP Release, But Recovers The Kiwi was weaker following a disappointing GDP release, but since the economic advisors see growth to strengthen next year, the markets fairly quickly turned around and re-bought the NZD/USD pair. We moved to 0.7470. Via Bloomberg: “New Zealand's economy unexpectedly contracted in the third quarter and moved closer to a recession as the worst earthquake in eight decades slowed housing and manufacturing. Gross domestic product fell 0.2 percent in the three months ended Sept. 30, the first drop since early 2009, from a revised 0.1 percent gain the previous quarter, a Statistics New Zealand report showed in Wellington today. The median forecast of 15 economists surveyed by Bloomberg News was 0.1 percent growth. The country's currency fell as rising risks of a recession bolster the case for central bank Governor Alan Bollard to keep interest rates unchanged until at least the second quarter next year. Finance Minister Bill English today said growth will accelerate next year, buoyed partly by the country hosting the Rugby World Cup finals, and keep the recovery intact.”

Source