The US Dollar managed to build more on its recent gains as forex traders started the week on a cautious note with the potential for increasing tensions in Korean and major concerns over the European debt crisis. Low Holiday trading volume limited potential follow through as traders remained conviction less heading into the New Year. An ECB report showing that the central bank has taken their foot off the stimulus pedal reignited concerns over the European debt crisis sending the Euro to a two week low against the US Dollar. A moody’s downgrade of nationalized Irish banks also added to existing worries which should remain a theme into 2011, and a supporting factor for the reserve currency
The Chicago Fed National Activity index was the only event risk on the calendar, with the second tier indicator provoking no reaction when it missed expectations. The metric which is designed to gauge overall economic activity and inflation was expected to show the economy was on trend in November with a 0.0 reading. The print of -0.46 pointed to a slowing of activity from the month prior’s reading of -0.25, adding to the overall bearish tone to markets.
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