Morning Forex Fundamental

EUR

Standard & Poor's is expected to release its verdict on credit ratings for 15 euro zone countries in January, after putting them on credit watch December 6 for a possible cut in the absence of decisive action from European leaders.

"We have got an informal signal from Standard & Poor's that they will come only in January," said a government source on condition of anonymity because exchanges with the rating agency are confidential.
"In conversations we have had, they have let this be known if you read between the lines," he added.

USD

Economists expect home prices to decline at a slower pace in forthcoming months with prices reaching a bottom in the middle of 2012. Property prices declined 3.2 per cent in October, compared to the same period last year.
"We'll continue to see prices drop," said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "The middle of 2012 is when we think prices will actually bottom."
"We need a higher level of confidence to get back to the traditional move-upstream or first-time buyer out of the rental," said Jeffrey Mezger, chief executive officer of KB Home.
"A lot of consumers are surprised, frankly, at how low home payments are compared to rent."

GBP

U.K. banks were closed on Monday in observance of Boxing Day.
U.K. stocks rose on Friday amid better-than-expected economic data from the world's largest economy. The benchmark FTSE 100 index gained 1.02%, or 55.73 points, to 5,512.70. The FTSE All-Share Index edged higher 0.98%, or 27.48 points, to 2,827.09.
"U.S. data is providing what markets have been looking for in terms of a wider economic improvement and rising employment," said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen.
Nationwide Building Society is to announce its month on month house price index on Friday. Economists expect house prices to rise 0.3 percent in December, after increasing 0.4 percent in November.

CHF

Most Swiss banks were closed on Monday in observance of Boxing Day.
Swiss stocks closed higher on Friday amid hopes the U.S. economy is gaining steam. The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, rose 0.97%, or 56.83 points, to 5,893.89. The broader Swiss Performance Index edged higher 0.90%, or 47.13 points, to 5,308.95.
"Recent positive economic data out of the U.S. have helped revive the markets," said Manish Singh, the London-based head of investment at Crossbridge Capital.

JPY

Japanese stocks edged higher on Monday after the U.S. Congress passed payroll tax extension. The Nikkei 225 gained 1.00%, or 84.18 points, to 8,479.34, while the broader Topix advanced 0.46%, or 3.32, to 726.44.
"The U.S. economic data is not bad on the whole," said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co. "Congress passed a two-month U.S. payroll tax cut extension, which reduced concerns in the market because investors had worried the end of the tax cut would likely weigh on January-March GDP."
Japan's Ministry of Economy, Trade and Industry is to announce its year on year retail sales on Wednesday. Economists expect the reading to increase 0.1 percent in November, compared to the same period last year.

What To Read Today

Europe

• The ECB allotted 489 billion euros in three year loans to 523 banks at the average rate of 1 percent on Wednesday, exceeding forecast of 293 billion euros.
• 26 EU member countries consider joining new treaty on deeper fiscal union, UK isolated; Merkel is "very pleased" with outcome of the summit.
• The ECB cut benchmark rate to 1% on December 8, but fell short of confirming it will buy EU member countries' bonds in unlimited quantities.

The euro: Still in casualty

http://www.bbc.co.uk/news/world-europe-16305731

It is a measure of the depth of the eurozone crisis that it is now identified as one of the defining stories of 2011, taking its place next to the Arab Spring.

ECB's Stark: IMF Cannot Be Used for Monetary Financing - Press

http://www.cnbc.com/id/45774361

Europe should not use the International Monetary Fund to go around the ban on central banks financing governments and current plans might breach that principle, European Central Bank Executive Board member Juergen Stark was quoted as saying on Friday.

USA

• The latest US macroeconomic data indicates that the national economic recovery is getting stronger; the number of Americans claiming for unemployment benefits fell to 364K while unemployment declined to 8.6% in November.
• Obama signed a spending bill of nearly $1 trillion on Saturday, averting collapse of federal government services; Congress approved a two-month extension of payroll tax break for 160 million U.S. employees on Friday.

U.S. stores hope "Mega Monday" led to brisk sales

http://www.reuters.com/article/2011/12/26/us-usa-retail-megamonday-idUSTRE7BP0HC20111226

Shoppers found a mixed bag of bargains and so-so deals on Monday, as a day off for many Americans lured some out for what was likely to be the third-busiest shopping day of the holiday season.

Obama calls for payroll tax cut to be extended 'without delay' as bill passes

http://www.guardian.co.uk/world/2011/dec/23/obama-payroll-tax-cuts-victory

President Barack Obama marked a rare political victory over Republican leaders in Congress – who bowed to White House demands on Friday for a short-term extension to tax reductions for working Americans – by calling for the measure to be applied to the rest of 2012 "without drama, without delay".

Asia & Pacific

• Japan's economy grew 1.4% in the third quarter 2011, while the exports fell for a second month in November as the global economy is cooling down; survey of Japanese manufacturers shows business conditions are deteriorating.
• China's industrial output contracted in December, intensifying worries the country might face hard economic landing next year whereas China's top officials guarantee growth will continue in 2012.

China to ease bank reserves soon, analysts say

http://www.marketwatch.com/story/china-to-ease-bank-reserves-soon-analysts-say-2011-12-26?link=MW_home_latest_news

Speculation is mounting that Beijing will further cut bank reserve requirement ratios, as inflationary pressure is easing while overall growth in the economy is slowing.

Intervention Failing as Yen Poised to Gain

http://www.bloomberg.com/news/2011-12-26/yen-intervention-failing-means-world-s-best-currency-poised-to-strengthen.html

There's been no better currency in 2011 than the yen and strategists forecast more gains, even as Japan promises to intervene again in foreign-exchange markets and expands the world's biggest debt burden.