Currency and International Sovereign Debt Markets

• As is customary at this time of the year, trading volumes are dropping considerably given the upcoming holiday festivities and the year-end closing of balance sheets. Here we may see volatility increasing for different assets, especially if there are any setbacks with the US Fiscal Cliff issue. However, US Congress is expected to reach a partial agreement during the last week of the year, prior to striking a complete deal in 2013.?

• On the other hand, some markets have been factoring in the possibility that the FOMC shall be taking further measures to stimulate the US economy. Now that it is winding up its Operation Twist program (scheduled for year-end 2012), the FED is expected to embark on an ?indefinite? program aimed at buying up USD45,000 million in US Treasury bonds per month, whereby they would be injecting more liquidity into the US economy. This should continue to favor US Treasury rates, and we could well see gains along the short end of the curve as sales along this stretch wind down. The 10-year US Treasury rate is expected to close for the year at 1.54%.?

• As for currencies, particularly the EURUSD rate, we have seen a greater sense of calm with regard to Europe. Agents are now seeing that the possibility of a Greece exit is lower today than it was previously, now that the authorities in the Euro Zone have been announcing measures aimed at ensuring greater stability within this part of the world, although they have dragged their feet in doing so. So the waves of fear with Europe ?whenever these occur? are becoming shorter and less significant. On the other hand, Europe?s economic figures remain weak.?

• The EURUSD rate has climbed over the last few weeks, amid figures showing the negative impact of Europe?s debt crisis, and although this does not mean that concern with the Euro Zone will go away entirely, it is becoming less of a factor. Here we are expecting the EURUSD rate to continue along a slight downward bias following a predominantly sideways trading pattern to close at around 1.2930, which is higher than the forecast we made a couple of months ago (1.26)?

• Several months ago we projected the USDCOP rate to close for the year at COP1,840, and this has remained basically unchanged. However there are certain risks at stake which could lead the local exchange rate to end up below this forecast. Unlike previous years, dollar liquidity on the part of banks is now running at historically high levels, concern with Europe has diminished to a certain extent, more liquidity is expected to flow out of the US given the projected outcome of the upcoming FED meeting and also progress is being made with the current tax reform bill in Colombia. In spite of this, however, the USDCOP rate should remain at above COP1,798 from here to the end of December, and thereon after continue along an upward bias, mainly due to the amounts of profits and dividends to be transferred abroad as well as the surprisingly low inflation numbers for November.

Source: http://www.fxstreet.com/fundamental/market-view/exchange-market-monthly-report/2012-12-19.html

beverly hilton roland martin whitney houston dead at 48 whitney houston dead 2012 whitney houston passed away heartbreak hotel don cornelius