US Data Not Good for Funding Currency

Should we be questioning if US data is beginning to top out? This week, US releases were less than enthusiastic, with jobless claims rising smartly and retail sales disappointing. The steady improvement in initial jobless claims rose a rather disturbingly large +24k last week, rising from a modestly upward revised +375k to +399k. Are we to see a large downward revision to the next NFP report? Employment statistics is to play a major role in this year’s Presidential race and to Obama’s reelection campaign. Up to this point, a notable improvement in US data has been particularly helpful for currencies geared to US and global growth. With the Fed still committed to stable policy through mid-2013, the dollar is expected to remain a good funding currency for risk trades.

Below are some other highlights of the week:

AMERICAS

• CAD: Monthly building permits fell less than expected in November, -3.6% vs. -3.8%, (fourth decline in five-month) as lower planned construction of institutional, industrial and commercial building affect the first gain in residential building plans.
• USD: US whole sale inventories rose less than forecasted in November (+0.1%) as distributors struggled to keep up with demand, a sign gains in manufacturing will keep the economy growing. Inventories followed a +1.2% revised gain in October.
• CAD: CMHC housing starts was +200k units in December, up from +185.6k units in November 2011.
• CAD: Canadian monthly new house prices rose slightly more than expected in November for the largest gain in six-months. Prices were up +0.3%, m/m and +2.5% y/y.
• USD: Softer US data disappoints all markets. December retail sales rose +0.1%, ex-autos it declined -0.2%, completing the first fall in 18-months.
• USD: Weekly US jobless claims benefits climb past expectations, surging +24k to a seasonally adjusted +399k.
• USD: US trade deficit widened for the first time in five months, +10.7% to -47.7b vs. -45.5b. Rising oil prices lifted imports while exports to the Euro region slumped. The trade gap with China narrowed -4.3% to 26.87b
• CAN: Posted a surprise trade surplus in November, +$1.07b from a -$0.5b deficit in October. Exports increased +3.2% (+1.7% was a price increase and +1.6% a volume increase).
• US: Consumer confidence came in stronger than expected. US preliminary January Michigan CSI increased by 4.1 point to 74, a fifth straight improvement from an August market low of 55.7

EUROPE Week in FX

ASIA Week in FX

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