20131213

Good morning,

Risky assets in the EU and the US were hit yesterday following a weaker than expected European Industrial Production and better than expected US Retail Sales, which has led to increased speculation on when the Fed will commence the tapering on asset purchases. Earlier this week, the US government reached a deal on the budget, which now puts all focus on next week's meeting at the FOMC, where the monetary policy and forward rate guidance will be revealed. Even though Yellen historically has been a dove, we will probably see a strengthening of the economic condition in 2014 following generally upbeat US macro figures. The USD has been depreciating especially against the EUR and GBP since July and although it strengthened in anticipation of the rumored tapering in September, it has been on the offer against most peers. EUR/USD is looking to take home its fifth week of straight gains and Cable could take home a sixth weekly gain out of seven. However, the USD should appreciate once the tapering will be announced.

Overnight, USD/JPY printed new 2013 highs at 103.93, taking out the highs from May at 103.73 on back of decent risk taking in the Asian region following an expanding PMI from New Zealand and decent yearly Japanese Industrial Production.

Today, the calendar is again on the light side. Spanish and Swiss inflation figures will dominate in the morning, before taken over by the Q3 Employment Change from the Euro zone. This could give some reaction to the EUR. For the GBP, MPC Member Dale will be hitting the wires at 12:30GMT and the highlight of the day in the macro figures will be the release of the US November PPI at 13:30, where focus will be on the core PPI  ex Food & Energy. Consensus MoM/YoY is 0.1%/1.4% vs. 0.2%/1.4% in October.

Have a nice weekend!