Market Gives Thanks for a Stronger Dollar

In the US, it was a holiday shortened trading week. Thanksgiving stuck near the end of the week has created a thin post market. All the Euro toxic headline prints have created a bias towards light trading, dominated by risk aversion trading strategies. 

This week is no different than the past three weeks with most market participants trading in the dark. Merkel again has refused the concept of using Euro-bonds. She has ruled out joint euro-area borrowing and an expanded role for the ECB in fighting the debt crisis after the failed 10-year Bund auction. Credit rating agencies are once again trigger happy, pulling the ‘Junk card’ on Portugal and Hungary. This is only promoting systemic risk fear amongst the Euro “core”, while the Hungary nod will only hurt the other EC3 countries. North America will have full trading desks come Monday and it’s then we will get to see what the ‘White Summit’ is all about.

 

Below are some other highlights of the week:

 

 

Americas

  • CAD: Canadian Wholesale trade increased for a fifth consecutive month in September, rising +0.3% to $48.7b. In volume terms, wholesale sales fell -0.5% in September.
  • CAD: Canadian retail sales rose twice as fast as economists forecast in September on purchases of new trucks and higher gas prices. Sales grew +1% to a seasonally adjusted C$38.2 b, the fastest pace in 12-0months.
  • USD: GDP climbed at a +2% annual rate from July through September, less than projected and down from a +2.5%. Gains in retail sales, manufacturing and housing this quarter, combined with lean inventories, raise the odds the world’s largest economy will pick up. However, US unemployment (+9.1%) and stagnant wages suggests that spending has been fueled by reductions in “domestic savings”. This should cast doubt on whether increases will be sustainable going into next year.
  • USD: The FOMC minutes showed that some policy makers considered easing policy further. “It was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative.”
  • USD: Durable goods orders fell last month as demand for aircraft and business equipment cooled, suggesting a slowing global economy may temper demand to manufacturers (-0.7% vs. -1%).
  • USD: Consumer spending rose less than forecasted in October as Americans used the biggest gain in incomes in seven-months to rebuild savings (+0.1% vs. a prior +0.7% gain). This will be worrisome for the Fed who is relying on the consumer to ignite US recovery.
  • USD: Weekly claims recorded more Americans filing for unemployment benefits last week, a sign that the labor market is taking time to gain traction. Applications for jobless insurance increased +2k to +393k.
  • CAD: BoC Governor Mark Carney’s comments that he can be “flexible” in bringing inflation back to target are leading some investors to bet he will not raise interest rates for two-years (+1%).
  • USD: Celebrated Thanksgiving, their biggest holiday of the year-retail now look forward to “cyber” Monday for indication on how strong

 
Other Links:
EUROPE Week in FX
ASIA

 

WEEK AHEAD

  • Economic, business and confidence facts come from the USD, CHF and NZD
  • Housing and building data is reported from the US, AUD, NZD and GBP
  • CAD gives us her monthly GDP release
  • Manufacturing PMI is delivered from CNY, USD and GBP
  • AUD reports private Capital Expenditure and Retail Sales
  • GBP has its inflation hearings
  • The week ends with the employment situation in CAD and USD

 

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research 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