USD Liquidity an Issue

US data has done a stellar job this week. Above expectation prints have helped to sustain the EUR and other risk related currencies as the market heads towards the showdown in Brussels on Monday. Initial jobless claims last week beat expectations, falling to the lowest level in four years, meanwhile Philly Fed for this month came in stronger than expected, as did January housing starts. The data seems to be putting the final squeeze on the weaker EUR shorts, determined for the single currency to end the week on a high. Will the elevated pricing remain there on Monday during US presidents Day? Obviously liquidity is going to be a major concern on this US national holiday, no matter what the outcome is in Brussels. It’s setting up to be an interesting opening session in Australasia!

Below are some other highlights of the week:


Americas

  • NA: It was another light week on the North American data front as we head into next weeks shortened trading week.
  • CAD: Auto sales fell-3% following a-1% drop in the previous month.
  • USD: Retail sales disappointed at +0.4% vs. +0.7% expected. However, non-autos beat expectations with a +0.7% rise allowing risk off trades to be considered.
  • USD: NY Fed index rallied to 19.53 this month from 13.48. The sub-indexes were mixed, but almost all of them remained in expansion territory, which suggests that the factory sector is doing well in the middle month of Q1.
  • USD: China sold US treasuries in December (-$32b), cutting its net holdings for the third consecutive month, but remains the largest foreign holder of US debt (+$1.1t). The net long-term TICS data showed buying of +$17.9b in December, after purchases of +$61.3b the previous month.
  • USD: According to the EIA, US commercial crude oil inventories fell by -0.2m barrels to +339.1m last week.
  • FOMC: Januarys minutes indicated that a few members said the Fed may soon have to consider more asset purchases, while others believed that the economic outlook would have to deteriorate first.
  • CAD: Manufacturing sales growth in December was lower than expected, up +0.6% to +$49.94b, the fifth gain in five months. The market was looking for a +2% increase. The headline data suggests that GDP expanded in December after two disappointing consecutive months.
  • USD: Housing starts rallied last month, +1.95% vs. -1.9%, but not enough to convince the market that this sector is ready to recover from the worst downturn in history. Building permits, future construction, rose +0.7% to an annual rate of +676k vs. +1.3% expectation.
  • USD: US PPI rose a seasonally adjusted +0.1% for finished goods in January. The core was up +0.4%, the largest increase in seven-months.
  • USD: US weekly claims fell last week, -13k to +348k, to the lowest level in four years. This is the third consecutive weekly drop. The more accurate four-week moving average declined -1.75k to +362.2k.
  • USD: The Philly Fed Manufacturing Index rallied to 10.2 this month from 7.3 in January. Both prices and new orders both rose, while the labor picture was mixed. Manufactures remain optimistic about the future.
  • CAD: Canada’s composite leading index increased +0.7% in January, completing the seventh consecutive increase. The advances were concentrated in manufacturing, housing and services employment, and was offset by declines in durable goods sales and equity prices
  • CAD: Canadian Consumer prices rose more than expected in January (+0.4% vs. -0.6%), led by higher gas and food costs. Core-prices (+0.2%, m/m) are again back over +2% (+2.1%, y/y), after a short spell below the inflation target (+1.9%).

 

EUROPE Week in FX

ASIA Week in FX

 

WEEK AHEAD

  • North America has a shortened trading week with Presidents day in the US
  • Down-under gives us Monetary Policy minutes in AUD and PPI in NZD
  • CNY provides us with flash Manufacturing PMI
  • GBP delivers public sector borrowing MPC minutes and revised GDP
  • CAD has core-retail sales and USD new and existing home sales
  • EUR is light with German ifo Business climate

 

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