Daily Market Close – China Slows but Will Meet Targets as QE3 Looms

US Dollar

Moody’s issued a warning that it could downgrade the US economy if federal budget negotiations fail. The Trade Deficit grew as US exports declined at a faster rate than imports. The United States exports $183.3 billion in June at the same time the country imported $225.3 billion. Exports to Europe dropped by more than 11% as the recession hit euro zone is struggling. China imports does not show signs of slowing down and the trade gap with the asian nation hit $29.4 billion

Daily Percent and High and Low Changes


Seeking Alpha has a good run down of why QE3 might not happen:
1. Food and Energy Prices Already High
2. The Fed will Be Out of Credible Bullets, QE4 will create hyperinflation
3. QE3 will Cause Severe Questioning of the Independence of the Federal Reserve
4. QE has no track record in causing any real GDP, real income, or job growth
5. The Fed owns too much of the long term Treasury market to make QE3 viable without eliminating bond market liquidity.
6. Printing Money has Never Historically Created Real Wealth
7. QE has diminishing returns and may already be fully priced in by equity markets.

A Reuters poll has 60% of economists who believe the Fed will announce another round of QE based on the lackluster jobs data release of last Friday.

Chinese Yuan

Chinese imports shrank 2.6% in August compared to last year which prompted a statement from Premier Wen who assured the World Economic Forum participants that China is on track to hit growth targets for this year. Chinese President Hu Jintao on the other hand admited that slack exports and unbalaced domestic growth are the challenges facing the economic recovery.

Open Positions Ratio Daily

Euro Crisis

In the same World Economic Forum Chinese Premier Wen expressed confidence in the Chinese economy will hit its targets. IMF Deputy Managing Director Zhu Min issued a support statement urging for confidence in the euro and the European Central Bank. He echoed the decision by IMF Chief Lagarde on their continued support fo rthe ECB decision to buy unlimited sovereign debt.

Canadian Dollar

The Canadian Trade deficit expanded to its record high on July at it hit $2.3 billion. Canadian exports fell by 3.4 percent. Energy led the decline with close to an 8.5 reduction in exports. A US slowdown pared with the higher loonie are hitting Canadian exporters hard as their main trading partner is importing less commodities and the currency is pricing out geographical advantages.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza