The Christmas holiday is the time when markets slow down and volatility is small. To no surprise of investors this year is similar. No macroeconomic publications can change this situation although on Friday there are a couple that investors can pay attention to. The Chicago PMI (Purchasing Manager's Index) will be published tomorrow. The index measures the health of the Chicago business environment. More important will be the New Home Sales publication (forecast: 718K, prior: 728K). The US housing market reports are important to the market recently since they show if the economy is finally rebounding.  

During the last couple of days the American dollar is on the decline. The EURUSD advanced from well below 1.44 to over 1.45 and currently it is being quoted at 1.4510. The weakness of the greenback is helping the Polish currency. The Złoty has been gaining and the USDPLN fell again below 2.50 and is being quoted around 2.4880. Since good mood of investors is back on the markets, the USDJPY is moving north. Higher activity of carry trade transactions (borrowing low-interest funds to invest them in higher-yielding financial instruments) pushed the USDJPY to 114.50. With confidence back on the markets, equities are on the raise. The Dow Jones is over 13,500 again (from 13,250 before the holidays) while the S&P 500 is close to the 1,500 barrier. Better performance of US indices lifted the Polish WIG 20, which rebounded from 3,380 to 3,550.

Stocks perform better when new-year approaches so investors should not be surprised. Those advances can make-up a little for the whole December, which was not as good as expected. The situation will remain stable till the end of the year. The first couple of days of January should determine in which direction markets will move.

Adam Narczewski