On Xmas weekend, China raised interest rates for the second time since mid-October in order to curb the fastest inflation in over 2 years which hit a 28-month high of 5.1% in November.
The benchmark one-year lending rate will rise by 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent.
Despite the market expected China to raise rates, the timing was surprising, as some investors had thought it was too late to move in 2010.
-Dec 27
According to Hometrack, House Prices in the U.K. fell in December by 0.4 % m/m - 1.6 % y/y in December with projections that house prices will continue to fall in 2011 possibly by 2.0 %
-Dec 28
9:00 GMT
The October US’s S&P/CaseShiller home price index fell to 145.32 from the prior month's 147.27. This was a YoY drop of -0.8% which was much worse than the anticipated change of -0.2% (prior +0.44%) and the biggest decline in December 2009. Additionally, 6 cities reached record low levels indicating that the US housing market remains extremely weak.
15:00
December US Conference Board consumer confidence was also a negative surprise coming in softer than the expected 56.4 with a print of 52.5 from the prior 54.3.
-December 30
13:30 GMT
U.S. weekly jobless claims fell to 388K, the lowest levels since July 2008. This was much lower than the market forecasts and a drop of 34K from the prior week's 422K indicating that the labor market is moving in the right direction.
14:45 GMT
The Chicago Purchasing Manager survey for December came in much stronger than expected as well with a jump to 68.6 - the highest level in 22 years - beating forecasts of a drop to 61 from the prior reading of 62.5.
15:00 GMT
In the housing market, November pending home sales unexpectedly rose by +3.5% MoM (cons. +0.8%,prior 10.1%).
UK Nationwide House Prices Stronger than Expected In December, have come in at +0.4% m/m, +0.4% y/y compared to median forecasts of -0.3%, -0.4% respectively.
The growing worries about British austerity measures had a negative impact on the pound on the previous. This week which is between Christmas and the New Year when liquidity is almost non-existent. Big players can use these times to move the market in their preferred direction and then take advantage of these moves when liquidity returns in early January.
This is seen in EUR/USD which managed to have a sustainable upward move since Wednesday’s early Asian session. Comparably, the GBP/USD pair moved with high volatility for the first four days of the week. Only on the last day of the year, the pair was able to show a steep uptrend.
GBP/USD has moved between expected resistance at 1.55 handle and support at 1.5350 before a decisive uptrend break of 1.55/1.5550 resistance carried the pair over the 1.5650 and capped at upper 38.2 level.
With the sentiment looking to change from bearish to bullish, on the long term perspective GBP/USD is forming a base for a reversal for an upside move.
For next week, the first week of 2011 I am looking for support at 1.5466 with next lower support at 1.5350.
On the upside, the immediate resistance is at 1.5800.
