Weekly update...

MARKET NEWS

Financial markets were relieved, at the beginning of the week, at a deal to avert the US fiscal cliff crisis. The US Congress approved a rare tax increase on the wealthiest households to prevent the US economy falling into recession. However, it is far from over as a rocky period begins. All eyes are now on the negotiations to avert the US debt ceiling which is scheduled to hit on the 28 February. Whilst the rally held in Global Stock Indices, the FX market played a different story with a strong risk off sentiment. The main victims were the Euro, British Pound and Gold which gave back their two week gains. The US FOMC statement did not help risk trades or the soft metal as the minutes revealed that while there was support for the Fed’s bond buying program there was disagreement over how long the program would last; mainly whether it will continue through 2013 or end before the year’s end. With the ongoing fiscal cliff issues, disagreement between FOMC members and better than expected ADP Non- Farm Employment (215k actual vs 134k expected), traders looked to cover their positions and pile into the safe haven US Dollar.

EFFECT OF THE NEWS LOOKING FORWARD

This week's US Non-Farm Payroll will be widely looked at considering the disagreement between Federal Reserve policy makers. However, all eyes are on the US fiscal cliff issues up until reaching the US debt ceiling forecasted for 28 February. As the negotiations will have positive and negative moments, always follow price action for a more conservative and consistent way to trade.