Thanksgiving keeps markets quiet

The euro spiked higher yesterday morning. Germany’s two main political parties finally came to an agreement to form a Grand Coalition. This sets the stage for a new government to be formed before the year-end. The EURUSD broke above resistance around the 1.3550/60 area, trading as high as 1.3613 mid-morning. But the single currency made its best gains against the Japanese yen. The EURJPY hit a four-year intra-day high, pushing above 138.80. 

The yen was generally weaker across the board. The USDJPY is closing in on 103.70 – the multi-year high achieved in May earlier this year. If it takes this level out then it will be back up to levels last seen five years ago. The recent sell-off in the yen is a function of a belief that the Bank of Japan will always be readier to keep monetary policy looser than any other central bank. In addition, the yen suffers when investor risk appetite is strong. 

The Aussie dollar is stronger this morning. Australian New Home Sales fell 3.8% month-on-month, but Private Capital Expenditure was much stronger than expected. 

German CPI and Unemployment data is due out today. Other significant releases include Euro zone M3 Money Supply and Retail PMI. There’s also a 10-year Italian bond auction and Spanish House Price Index. Bank of England's governor Mark Carney will hold a press conference to coincide with the release of the Bank’s Financial Stability Report, so the British pound will be in focus. A 30-year Gilt auction is also expected. 

It is Thanksgiving Day in the US so markets there are shut, and will also close early on Friday. 

David Morrison