Dip In Risk On Greek Deal Delay

The dollar recovered on Monday after investors impatient for the arrival of a final package on Greece began to drift back to safety as more time passed and still no news. The event diary lay bare as workers in the U.S returned from the Thanksgiving weekend festivities, no doubt wishing to ease back into the saddle slowly. There was some data, however, including the Chicago Fed National Activity Index (Oct) which pulled-back a bit to -0.56% from 0.00% and the Dallas Fed Manufacturing Index (Nov) which dropped -2.8 from 1.8 when a rise to 2.5 had been envisioned. The themes for the week ahead, will no doubt include a re-emergence of fiscal cliff fears -- and also Housing which takes centre stage in the days to come with House Price Index and S&P Case-Schiller on Tuesday, and New Home Sales on Wednesday.

EUR
The euro pulled back slightly on Monday after optimism receded after the absence of any news from the meeting of euro-zone Finmins on a deal for Greece. There were encouraging reports that the teleconference on Saturday had made progress in securing the 10bn bridging finance for Greece's two year fiscal extension request but no more. The single currency was further weighed by the results of the Spanish regional elections which showed a large swing in voting to extremist pro-Catalan-independence parties, leading to fears of instability in the country which is already suffering from very difficult economic conditions. On the data front Italian Consumer Confidence (Nov) fell to 84.8 from 86.2; German Gfk Consumer Confidence (Dec) fell to 5.9 from 6.1.

GBP
The pound declined on Monday after risk appetite slowly withdrew from the peaks reached last week when optimism over Greece led investors to pile into the euro and also sterling. There were other good reasons to buy the pound too: the recent BOE minutes showed QE was temporarily off the menu with only one member voting for more stimulus, Q3 GDP data showed a rise in growth, employment has kept falling and recent retail sales figures were better-than-expected, so despite recessionary headwinds the U.K economy remains resilient. From a strict data perspective tomorrow's Q3 GDP revisions are the highlight of a rather light data week, with a marked shift either up or down potentially magnifying leverage of corresponding sentiment extremes.

JPY
The yen rose marginally on Monday on safety demand after slight disappointment at the fact that the latest sit-down in Brussels had not reached an decision on Greece yet -- although its possible such a package could emerge later on Monday night. The BoJ minutes for October showed that the two newest members of the board Sato and Kiuchi backed radical new measures to introduce a link between more QE and the Consumer Price Index, however, the majority ruled against such measures. This was seen as indicative of a growing split within the BoJ between those who want to see more aggressive monetary policies and a more conservative old guard. Newer members are seen as having policies more in harmony with the radical approaches proposed by the opposition LDP party, which is favourite to win the December 16 election, and has caused a massive sell-off in the yen since new elections were announced several weeks ago.