Currency Trading Update

Our top two contestants found themselves on the wrong side of the risk trade again as the prospect of another U.S. fiscal stimulus plan would send equities higher and the Yen crosses along with them. Our leader would slip to third as they chose to close their short positions that they had rode into the lead too soon and missed out on the retrace latter in the day. Contestant 2 from yesterday would free fall to 17th as they made several large trades that were caught on the wrong side of momentum. The new contestant 1 would soar from the 17th position on the back of several large successful long EUR/JPY trades making them the only recent entry into the top five that wasn’t trading the GBP/JPY pair. Contestant 2 would also jump several places rising from 15th on long GBP/JPY positions taking advantage of the bout of risk appetite. However, the value for the top portfolio shrunk for a second day as it only took a total of $304,081 to claim the spot compared to $396,723 two trading days ago. Contest wide the EUR/USD remained the most popular as total positions in the pair rose to 34% from 29%, while NZD/JPY saw interest fall to 2% from 9%. The lack of major event risk on the day also saw a 15% decline in volume.

The next 24 hours will give us an insight into global sentiment with an investor confidence reading from Switzerland and an Australian consumer gauge. The U.K. NIESR GDP estimate may provide the most potential market moving release as it is closely watched by policy maker.

Asian Trading Session
12/09, 19:01 ET
U.K. NIESR GDP Estimate (NOV) – The unofficial estimate of GDP is an accurate predictor of growth and is closely watched by monetary officials. October saw the indicator register a negative reading for the fourth straight month. The -0.5% print was a clear indication that the British economy was in a recession and it is no coincidence that the BoE has since aggressively lowered their benchmark rate to 2.00%. Another drop in growth could weigh on the Pound as more easing would be expected by the central bank. Conversely, a positive reading could raise hope that recent measures to promote growth are gaining a foothold and lead to Sterling bullish sentiment.

12/09, 19:30 ET
Australian Westpac Consumer Confidence (DEC) – Consumer confidence in Australia rose to 4.3 from -11.0 in November as aggressive easing from the RBA and falling oil prices boosted sentiment. If optimism continues to grow it could be a supportive factor for the Australian dollar as it is an indication of future consumer spending and domestic growth.

European Trading Session
12/10, 05:00 ET
Swiss ZEW Survey (DEC) – Investor confidence in the Swiss economy rose last month to minus 88.5 from minus 91.1 - the lowest level on record. The rebound in optimism was due to the efforts by the European governments to help stem the credit crisis including a coordinated rate cut. Since the last release the Swiss National Bank has cut its target rate by another 100 bps bringing their benchmark rate to 1.00%. The central bank is forecasted to lower rates again by another 50 bps on December 11th. However, a significant increase in consumer confidence could keep the monetary policy committee on hold and lead to the Swiss Franc trading higher. Conversely, a drop in confidence would lower domestic growth expectations and add to the troubles of the export driven nation brought on by the decline in global demand. This would increase the odds of a rate cut and inspire Swiss Franc bears.

US Trading Session
12/10, 10:00 ET
U.S. Wholesales Inventories (OCT) – Wholesalers are expected to have seen their inventory levels drop by 0.2% in October after a 0.1% decline the month prior. Typically this would be a sign that demand is increasing and retailer purchases are growing. However, given the current environment it may be attributed to producers cutting back as a decline in demand is expected going forward. The indicator is not typically market moving but could provide some insight to the upcoming retail sales figures.