- The dollar rose on Wednesday. The Federal Open Market Committee repeated its pledge to keep interest rates exceptionally low for an extended period and said the US economy is strengthening and the labor-market deterioration is abating. US consumer prices increased modestly and housing starts rose strongly. The S&P 500 was up 1.25 to 1,109.18, struggling to penetrate crucial resistance. The yen rose for a second day. The euro was little changed, just above the 1.45 support. Eurozone manufacturing and service industries continued to expand, while the annual inflation rate rose for the first time in seven months. Sterling rose, supported by the first decline in UK claimant counts since February 2008. The Canadian dollar was little changed, just above its support.
- The AUD/USD fell to the critical 0.90-area support, which is the neckline support from the small head-andshoulder top. The pair had already broken its long-term uptrend, indicating a major correction. If the neckline support is broken, the AUD/USD will possibly fall to the 0.86 area. A penetration of the shoulder area in the 0.94 area will reverse the bearish outlook.
Financial and Economic News and Comments
US & Canada
- US consumer prices grew 0.4% m/m in November, as forecast, after a 0.3% m/m increase in October, CPI data from the Labor Department showed. The CPI rose 1.8% y/y, as expected. Energy prices climbed 4.1% m/m in November, while food prices increased 0.1% m/m. The core CPI, which excludes food and energy, was unchanged m/m in November, the first month without a rise since December 2008, after a 0.2% m/m increase in October. The core CPI rate was 1.7% y/y, matching October's year-on-year rate.
- US housing starts rebounded 8.9% m/m to a seasonally adjusted 574,000 annual rate in November from a downwardly revised 527,000 rate in October, according to figures released by the Commerce Department. Single-family starts advanced 2.1% m/m in November and rose 35.0% from the January/February low. Housing starts gained in every major region of the country. Building permits rose a more-than-expected 6.0% m/m in November to a 584,000 annual rate, the fastest pace in a year, from a downwardly revised 551,000 pace in October. Permits for single-family units climbed 5.3% m/m, to the fastest pace since September 2008.
- Canada's manufacturing sales rose a more-than-expected 2.0% m/m in October, the fourth gain in five months, to C$42.5 billion ($40.1 billion), after a downwardly revised 1.0% m/m increase in September, according to figures from Statistics Canada. October manufacturing sales fell 16.6% y/y.
- Eurozone consumer prices rose 0.5% y/y in November, the first year-on-year rise in seven months, revised down from a previously reported 0.6% y/y rise, following a 0.1% y/y decline in October, CPI data from Eurostat showed. November CPI increased 0.1% m/m. The core CPI was up 0.1% m/m in November, and the core inflation rate slowed to 1.0% y/y from October's 1.2% y/y.
- The eurozone composite PMI rose more than expected to 54.2 in December from 53.7 in November, advance December PMI data from Markit Economics showed, indicating Europe's service and manufacturing industries expanded to the highest level since October 2007. The eurozone manufacturing PMI increased to 51.6 in December from 51.2 in November, while the services PMI advanced to 53.7, the highest level since November 2007, from November's 53.0.
- Germany's manufacturing and service sectors expanded further in December. The German manufacturing PMI advanced to 53.1 in December from 52.4 in November and the services PMI rose to 53.1 from November's 51.4, according to advance December PMI data from Markit Economics.
- UK jobless claims unexpectedly fell 6,300 in November, the first fall since February 2008, to 1.63 million, after a downwardly revised 5,900 increase in October, figures from the Office for National Statistics showed. The claimant count rate was 5.0% in November, slightly less than expected, after a downwardly revised 5.0% in October. Overall unemployment in the three months through October rose 21,000 to 2.49 million, the smallest increase in 17 months. The unemployment rate based on International Labour Organization methods increased as forecast to 7.9% for the three months to October from 7.8% for the three months to September. Average earnings including bonuses grew 1.5% y/y in the quarter through October after increasing an upwardly revised 1.4% y/y in the quarter through September, while growth for average earnings excluding bonuses was unchanged at 1.7% y/y.
- Australia's Q3 2009 GDP grew a less-than-expected 0.2% q/q, a third consecutive quarterly expansion, after a 0.6% q/q gain in Q2, pointing to a positive outlook for the Australian economy in 2010, data from the Australian Bureau of Statistics showed. The Q3 GDP rose 0.5% y/y, following Q2's 0.6% y/y expansion.
- Japan's service demand rebounded in October. The tertiary industry activity index increased 0.5% m/m to 96.8 in October after a revised 0.6% m/m decline in September, the Ministry of Economy, Trade and Industry said.
- Japan's machine tool orders were down 8.4% y/y in November, revised from a previously reported 8.6% y/y decline, final November data from the Japan Machine Tool Builders' Association showed, following a 42.5% y/y drop in October.
- Foreign direct investment in China jumped 32.0% y/y in November, the fastest pace in 16 months, to $7.02 billion, after a 5.7% y/y increase in October, the Ministry of Commerce said. Investment declined 9.9% in the first 11 months of the year.
FX Strategy Update