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Fiscal Cliff Averted, EUR/USD Jumps

January 2, 2013

EUR/USD jumped today, following the two-session decline, as US politicians worked out a bill that allows avoiding the so-called fiscal cliff. The news boosted almost all currencies, except for safer ones like the US dollar and the Japanese yen. As for US fundamentals, it looks like the manufacturing sector emerged from the brief contraction period, while construction spending unexpectedly declined.

ISM manufacturing PMI rose from 49.5% in November to 50.7% in December, rising above the neutral 50.0 level. Analysts have expected a modest increase to 50.2%. (Event A on the chart.)

Construction spending dropped 0.3% in November from October. The drop was completely surprising as market participants have anticipated a 0.6% rise. Moreover, the October reading of 1.4% was revised negatively to 0.7%. (Event A on the chart.)

EUR/USD for 2013-01-02

If you have any comments on the recent EUR/USD action, please reply using the form below.

One Response to “Fiscal Cliff Averted, EUR/USD Jumps”

  1. Eric D

    Well, it seems deflation problems in Japan are somehow making up for the USD relative weakness among the “fiscal cliff” fears (although I am by no means a fundamental analyst), Goldman Sachs projected it around 100-112 for this year in case the downward spiral of deflationary stagnation can not be reversed, imagine the scenario where you want to “raise” your inflation, in this case so it gets to the 2% to help bust economy and help people spend!

    Reply

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