FX Weekly: 5th December 2011

• Oil and Gold remain the most volatile contracts as risk tolerance reversed course. Commodity currencies and Scandies were the pack leaders last week in G20 FX – most strength seen against USD and JPY

• ECB expected to cut interest rates again (Thu) and provide additional liquidity. Political progress also a key focus – full fiscal union would be hugely EUR/USD positive

• Periodic Chinese activity data could be crucial if global economic slowdown is worse than feared

• On the political front, near-term focus is on Italy’s reform agenda to be unveiled today and on the new Spanish government’s program once it takes office on December 22nd

• Multiple central bank meetings coming up: RBA and BoC on Tuesday, followed by RBNZ, BoE and ECB on Thursday. The RBA could be market moving because a cut is fully priced but the bank may not ease so soon after its previous move