Dollar to make the Turn ahead

The EUR certainly hogged most of the headline last week. It seems investors appear most bullish on the USD and JPY and overwhelmingly bearish on the EUR and AUD. US data continues to pleasantly surprise even with the Euro-zone believed to be entering or has entered its own recession. The FOMC meeting delivered no surprises. As expected, they kept policy unchanged with no mention of new communications strategies, discount rate cuts or of QE3. It was noted that key sections of the FOMC policy statement were identical to the statement issued on 2 November. With Europe under so much pressure it’s now a guessing game “when” QE3 is required!

Below are some highlights of last week:


AMERICAS

  • USD: US retail sales disappointed. Sales rose +0.2% in November, compared with the +0.6% expected. Ex-autos, sales rallied +0.2% versus +0.5%. Despite the previous months being revised a tad higher the overall print was a disappointment.
  • USD: The FOMC meeting delivered no surprises. As expected, they kept policy unchanged with no mention of new communications strategies, discount rate cuts or of QE3. It was noted that key sections of the FOMC policy statement were identical to the statement issued on 2 November. With Europe under so much pressure it’s now a guessing game “when” QE3 is required!
  • US: On Thursday, PPI, Empire State manufacturing and initial weekly job claims offered real encouragement on the health of the US economy.
  • US: Jobless claims continue to trend lower (initial +366k, continuing claims +3.603m) and reinforce the recent generally positive tone to US data. The market remains weary that firings maybe ebbing, or is it because hiring is about to accelerate? Initial claims were at this level three and a half years-ago.
  • US: Empire Manufacturing surprised higher and the details were firmer. New orders resumed growth this month; however, it’s too early to call this a “new” trend. The unfilled order backlog continues to get worked off and the reason why shipments are gaining.
  • US: Wholesale prices rose slightly in November amid higher food costs, but the underlying rate of increase in PPI remained tame, indicating little inflationary pressure. PPI rose a seasonally adjusted +0.3%.
  • US: Philly Manufacturing (10.3 vs. 3.6) continued to expand this month. In the details, employment stayed positive, but slowed a tad m/m. However, there were big gains in prices received, similar to the Empire report. “Optimism about the future is on the rise”.
  • CAD: Canadian Capacity accelerated (81.3 vs. 79.9) to its highest level in four-years. Capacity use was closed off faster than expected in Q3 and the prior quarter was revised higher. Canada is still operating at a lower rate than its peak in 2000 (87%). Despite this, the BoC has been clear that a move toward “neutralizing rates will lag behind closing off spare capacity in part given global risks affecting the 2012 outlook”.
  • USD: Consumer prices held flat in November (+0.0% vs. -0.1%) as a drop in energy costs offsets a slight rise in food prices and other items, underscoring weak demand.
  • CAD: Overseas interest in Canadian assets dropped to +c$2.03b vs. +c$7.35b last.
  • CAD: New Job insurance claims rose +4.2% in October, although long term jobless benefit claimants fell -1% in October and -20.3% on the year.

 

EUROPE Week in FX

ASIA Week in FX

 

WEEK AHEAD

  • Business confidence reports come to us from NZD and GER
  • Monetary Policy minutes are released in GBP, AUD and JPY
  • Inflation is recorded in GBP and CAD
  • GBP and NZD show us their Current Accounts
  • Building permits and Home sales are delivered in the USD
  • GDP comes to us from CAD and NZD
  • CAD announces its core-retail Sales while the US delivers Durables

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell