• Following last week's strong volatility, the dollar traded modestly lower on Monday as concerns eased about Dubai's debt problem after the central bank of the United Arab Emirates pledged to provide emergency liquidity to the region's banks. The dollar and global equity markets are at important technical levels, making directional bets difficult. The Chicago PMI unexpectedly accelerated with new orders rising, signaling the US economic recovery is steadily progressing. The S&P 500 rose 4.14 to 1,095.63 despite weak Thanksgiving shopping. The USD/JPY fell despite lower-than-expected Japanese industrial production and pledges by the Japanese government to support the pair. The euro was little changed and hovering around the 1.50-handle, supported by the first annual EMU consumer-price inflation since April. Sterling fell on mixed UK data. We are selling the GBP/USD with stop at 1.6775. The Canadian dollar was boosted by higher commodity prices.
  • The AUD/USD rose ahead of the Reserve Bank of Australia's interest-rate decision meeting, supported by Australia's higher inflation and business inventories as well as business profits falling at the slowest pace in four quarters. In a strong uptrend, the pair has worked off its short-term overbought condition; thus, arguing for a continued AUD/USD rise. However, the pair looks toppy and investors expect the RBA to hike rates for a third time to 3.75%. If this does not happen or risk aversion flares up again, a new test of the long-term uptrend will likely occur. A penetration of the uptrend would be a bearish development.

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Financial and Economic News and Comments

US & Canada

  • The Chicago business barometer unexpectedly rose to 56.1 in November from 54.2 in October, indicating US business activity expanded above the 50 expansionary level for a second consecutive month, according to the Chicago Report by Kingsbury International, Ltd. and the Institute for Supply Management - Chicago, Inc. The data points to continued improvement in economic conditions, albeit at a slow to moderate pace and a double-dip recession isn't likely, according to the report. The production index declined to 57.6 in November from 63.9 in October; however, remaining above the 50 expansionary mark for the third time in four months. The new orders index increased to 62.8 from October's 61.4, indicating new orders continued to expand. Employment rate of contraction eased in November, with the employment index increasing to 41.9 from 38.3. The prices paid index rose to 52.6 in November, its sharpest rise in a year, from 48.6 the prior month.

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  • Canadian GDP grew at a 0.4% annualized rate in Q3 2009, the first expansion in four quarters, after a revised -3.1% annualized pace in Q2, GDP data from Statistics Canada showed, signaling an end of Canada's first recession since 1992. The economy expanded 0.4% m/m in September, the first gain in three months.
  •  Canada's industrial product prices unexpectedly declined 0.3% m/m in October and raw materials costs increased a less-than-expected 2.5% m/m, according to a separate report from Statistics Canada.

Europe

  • Eurozone consumer prices rose 0.6% y/y in November, a flash estimate released by Eurostat showed, following a 0.1% y/y October decline that was a fifth consecutive year-on-year fall.
  •  The GfK NOP UK consumer confidence index unexpectedly declined to -17 in November from -13 in October, indicating UK consumer confidence weakened for the first time since January, according to data from GfK NOP.
  •  UK house prices rose 0.2% m/m to £156,700 ($258,000) in November, a fourth consecutive month-on-month gain, after a 0.2% m/m rise in October, Hometrack Ltd. reported. November house prices declined 2.9% y/y, following October's 4.2% y/y slide.
  •  According to figures from the Bank of England, total net lending to individuals increased £0.3 billion in October and net lending secured on dwellings increased £0.9 billion. The number of loan approvals for house purchase rose to 57,345 in October from 56,205 in September, registering the highest level since March 2008 and above the previous 6-month average. Consumer credit declined £0.6 billion, below the previous 6-month average.

Asia-Pacific

  • Australia's private sector credit was unchanged m/m in October after a revised 0.1% m/m decline in September, the Reserve Bank of Australia said. October private sector credit was up 1.1% y/y, following a 1.7% y/y September increase. Housing credit rose 0.7% m/m in October after rising at the same rate in September. October housing credit climbed 8.0% y/y.
  • Australian company operating profits unexpectedly declined 2.1% q/q in Q3 2009, the slowest pace in four quarters, after a revised 7.0% q/q decrease in Q2, according to data from the Australian Bureau of Statistics.
  • Australian new home sales fell for a second month in October, falling 6.0% m/m, following a 4.5% m/m September decline, signaling a soft home building recovery, according to the latest Housing Industry Association survey of Australia's largest builders.
  •  Japan's industrial production increased a less-than-expected 0.5% m/m in October, an eighth consecutive month-on-month gain and the slowest pace in eight months, preliminary October IP data from the Ministry of Economy, Trade and Industry showed, following a 2.1% m/m advance in September. October IP fell 15.1% y/y, following an 18.4% y/y September drop.

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  •  The Nomura/JMMA PMI declined to 52.3 in November from 54.3 in October, indicating Japan's manufacturing activity expanded for a fifth consecutive month albeit at a slower pace, according to data released by Markit Economics.
  •  Japanese housing starts fell 27.1% y/y in October, an eleventh straight year-on-year fall, after a 37.0% y/y drop in September, according to figures from the Ministry of Land, Infrastructure and Transport. Construction orders fell for a twelfth consecutive month in October, plunging 40.1% y/y, deepening a 14.0% y/y September decrease.