Currency Trading Update

A look at the leader board of the currency trading portion of the Million Dollar Portfolio Challenge shows that one trader is making a killing, as he dominates with 4 of the 5 top spots. Focusing on the leading portfolio, this contestant has traded EUR/USD aggressively, normally keeping positions open for as little as an hour to as long as a day. This strategy has allowed him to take his portfolio balance from $599,757 on Friday to a whopping $1,157,515 by Tuesday's close. Despite these gains, contestant number 1 in the currency trading portion hasn't even broken in to the top 20 of the overall contest.
Here's a look at upcoming event risk during the next 24 hours:

Asian Trading Session
*No key indicators due to be released.

European Trading Session
01/08, 01:45 ET
Swiss Unemployment Rate (DEC) - Resilient domestic demand has helped to serve as the engine of growth in Switzerland, along with export growth, but the upcoming release of the Swiss labor market data may suggest that consumption could falter. The unemployment rate is anticipated to have risen to a nearly two-year high of 2.9 percent in December from 2.7 percent, and while this is not a consistent market-mover for the Swiss franc, any sort of surprising figure could impact the currency.

US Trading Session
01/08, 07:00 ET
Bank of England Rate Decision - The British pound could finally break below support at 1.4400 this week as Bloomberg News is forecasting that the Bank of England will cut rates by 50 basis points at 7:00 ET on Thursday, while Credit Suisse overnight index swaps are fully pricing in a 25 basis point reduction. This is indeed within the realm of possibilities since the UK has tipped into recession and the BOE, and UK government, anticipate that things will only get worse. In fact, the BOE’s latest Credit Conditions Survey for the fourth quarter indicated that they had worsened, with availability of loans down despite unexpectedly stable demand for mortgages. Furthermore, the survey said that spreads on secured lending to households and on corporate lending had widened, and that defaults on household and non-financial business loans had increased. Overall, this leaves the odds in favor of year another rate cut by the BOE on January 8, but the reaction of the British pound may depend on what sort of bias is reflected in the Monetary Policy Committee’s subsequent statement.

01/08, 10:00 ET
Canadian Ivey PMI (DEC) - The Ivey Purchasing Managers' Index (PMI) - a gauge of business activity - is forecasted to fall to the lowest level since record keeping began in 1999 during December from 40.2 in November. Any declines will suggest that the Canadian economy is the next to head for recession, though it has held up well relative to countries like the US as domestic demand holds strong. Index readings below 50 signal a deterioration in activity, and traders should keep an eye on the individual components of the index, particularly employment. Indeed, this component can sometimes serve as a good leading indicator for the release by Statistics Canada of the net employment change on Friday. Furthermore, Ivey PMI can be market-moving for the Canadian dollar, with disappointing figures likely to weigh on the currency.

Terri Belkas
Currency Strategist
Forex Capital Markets LLC

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