- The dollar traded mostly lower against its counterparts on Thursday. The dollar index fell for a third day as US stocks rose for a third day. The Conference Board US leading economic indicators index rose in July for a fourth straight month and manufacturing in the Philadelphia region expanded in August for the first time in almost a year, adding to signs the US recession is ending. The S&P 500 rose 10.91 points to 1,007.37. The USD/JPY, rising modestly, was unable to break the 94-area support. The euro rose for a third day on improving risk appetite. Sterling was pressured by a report that the UK had its largest budget deficit in July since records began in 1993. The Australian dollar rose; the Reserve Bank of Australia continued its aggressive intervention to slow the aussie's appreciation. The Swiss franc gained as reports showed Switzerland's trade surplus widened in July and the ZEW Swiss investor sentiment index rose sharply in August.
- The USD/CAD fell for a third day, pressured by an unexpected gain in Canada's wholesale trade. June wholesale sales posted the first increase since September 2008 while inventories continued to fall, indicating Canadian businesses are making progress in getting inventories in line with demand. The pair was also pressured by better risk appetite and reports that Goldman Sachs is recommending shorting the USD/CAD. The pair is inversely correlated with crude oil, which is at an important resistance in the 73-74 area. If the crude oil price resistance is broken, the pair will continue its decline. The USD/CAD has support levels in the 1.08 and 1.06 areas and resistances in the 1.11 area and from the downtrend line.
Financial and Economic News and Comments
US & Canada
- The US leading economic indicators index, a measure of future economic activity, advanced a 0.6% to 101.6 in July, a fourth consecutive monthly gain, after an upwardly revised 0.8% increase in June, LEI data from the Conference Board showed, indicating a US economic recovery is in sight. The coincident index, measuring current economic activity, was unchanged in July, after declining a revised 0.4% in June and falling every month since October.
- US initial jobless claims in the week ending August 15 unexpectedly rose 15,000 to 576,000, the highest level in three weeks, from the previous week's upwardly revised 561,000, suggesting labor market conditions remain difficult, data from the Labor Department showed. The 4-week moving average of new jobless claims climbed 4,250 to 570,000, the highest average since the week ending July 11. Continuing jobless claims in the week ending August 8 unexpectedly increased 2,000 to 6,241,000 from the preceding week's upwardly revised 6,239,000. The 4-week moving average of those continuing claims declined 2,500 to 6,266,000. The insured unemployment rate for the week ending August 8 was unchanged at 4.7%.
- The Philadelphia Fed manufacturing index rose more than anticipated to 4.2 in August from -7.5 in July, indicating manufacturing in the Philadelphia region expanded for the first time in almost a year, according to the Federal Reserve Bank of Philadelphia's August 2009 business outlook survey. The new orders index advanced to 4.2 in August from -2.2 in July; the shipments index improved to 0.6 from -9.5; and the inventory index rose to 0.3 from -15.4. The employment index increased to -12.9, an 11-month high, from -25.3.
- Canada's wholesale sales unexpectedly increased 0.6% m/m to C$40.4 billion ($36.8 billion) in June, the first gain in nine months, after a revised 0.2% m/m decline in May, according to figures released by Statistics Canada. The June increase was led by gains in automobiles and food products. Inventories declined 1.1% m/m to C$56.5 billion in June, lowering the inventory-to-sales ratio to 1.40 from May's 1.42.
- UK retail sales increased 0.4% m/m in July, as forecast, after an upwardly revised 1.3% m/m advance in June, data from the Office for National Statistics showed. July retail sales rose a more-than-expected 3.3% y/y, the largest year-on-year gain since May 2008, following June's upwardly revised 3.1 y/y rise.
- The UK had an £8.0 billion ($13.2 billion) budget deficit in July, the most for the month since records started in 1993, compared with a £5.2 billion surplus a year earlier, the Office for National Statistics reported. Government revenues fell 15% y/y in July, the largest fall since records began in 1998. Net debt totaled £800.8 billion in July, equivalent to 56.8% of GDP and the largest debt burden since the mid-1970s.
- Switzerland's trade surplus widened to CHF2.35 billion in July from a downwardly revised CHF1.50 billion in June, according to trade data from the Swiss Federal Customs Administration. Exports rose 4.1% m/m in July, while imports declined 1.7% m/m.
- Switzerland's investor sentiment improved sharply in August. The ZEW-CS Swiss economic expectations index jumped to 18.6 this month from 0.0 in July, according to a survey from Credit Suisse and the ZEW Centre for European Economic Research.
- The Reserve Bank of Australia said it sold A$705 million into currency markets in July, well down from A$1.943 billion in June.
- Japan's convenience store sales posted a 7.5% y/y drop in July and a 2.3% y/y decline in June, following a series of gains in past several months, the Japan Franchise Association said.
FX Strategy Update