- The dollar fell versus its rivals on Wednesday as better-than-estimated corporate earnings and economic data lifted investor risk appetite. The Dow Jones 30 index closed above 10,000 for the first time in over a year and the S&P 500 index rose 18.83 points to 1092.02. The dollar index dropped to the lowest level since August 2008, breaking the 76-area support. Some Federal Reserve policy makers said expanding the Fed's $1.25 trillion mortgage-backed securities purchase program may help revive the economy, according to minutes of the Federal Open Market Committee's September 22-23 meeting released today. Better-than-expected Chinese trade data, relatively upbeat US retail sales, rising eurozone industrial production, and improving UK labor-market conditions signaled the global economy is on the mend. The Bank of Japan maintained its key interest rate at 0.10%, as forecast. The BOJ said Japan's economy has started to pick up but warned that the outlook is attended by a significant level of uncertainty stemming mainly from developments in overseas economies and global financial markets.
- The USD/CAD fell for the eight days out of nine as crude oil, Canada's largest export, rose above $75. The pair's direction continues to be inversely related with equity and commodity prices. The Bank of Canada may worry about its inflation target and Canada's economic recovery as the loonie appreciates; thus, making a BOC intervention to support the pair possible but not likely. The USD/CAD is oversold. There are strong supports in the 1.02 and 1.00 areas and strong resistances in the 1.05-1.06.
Financial and Economic News and Comments
US & Canada
- US retail sales declined a less-than-expected 1.5% m/m in September after a downwardly revised 2.2% m/m increase in August, data from the Commerce Department showed. The decline in September retail sales was due auto and parts sales which tumbled 10.4% m/m, the biggest drop since August 2005, after a 7.8% m/m gain in August. Retail sales excluding autos advanced a more-than-expected 0.5% m/m in September after a downwardly revised 1.0% m/m increase the previous month. Retail sales fell 5.7% y/y in September but rose at a 2.1% annual rate in the last three months. Excluding autos, retail sales declined 4.9% y/y but grew at a 4.0% annual rate in the past three months. Retail sales excluding autos and gas were up 0.4% m/m in September, a second straight gain.
- US import prices were up as forecast 0.1% m/m in September, the sixth rise in seven months, after a downwardly revised 1.6% m/m advance in August, data released by the Labor Department showed. Excluding petroleum, import prices rose 0.6% m/m in September but declined 4.1% y/y. Export prices slid 0.3% m/m in September after a 0.7% m/m increase in August. Import prices fell 12.0% y/y in September; export prices decreased 5.6% y/y.
- US business inventories fell a more-than-expected 1.5% m/m in August, the largest fall this year, to a seasonally adjusted $1.311 trillion, after a downwardly revised 1.1% m/m decline in July, figures from the Commerce Department showed. Business sales increased 1.0% m/m to $989.6 billion, following July's upwardly 0.3% m/m advance. The inventory-to-sales ratio declined to 1.33 in August from 1.36 in July, higher than August 2008's 1.30. Inventories fell 13.3% y/y in August; sales dropped 15.1% y/y.
- Eurozone industrial production grew 0.9% m/m in August, a fourth consecutive month-on-month gain, after an upwardly revised 0.2% m/m increase in July, Eurostat reported. August IP fell 15.4% y/y, the slowest year-onyear fall in eight months, following July's 15.9% y/y drop.
- UK jobless claims rose a less-than-expected 20,800 in September, the smallest monthly rise since May 2008, to 1.63 million, the highest level since April 1997, after rising a downwardly revised 23,000 in August, figures from the Office for National Statistics showed. The claimant count rate was 5.0% in September, slightly less than expected. Overall unemployment was 2.47 million in the three months through August, a 1,000 decline from the three months through July. The unemployment rate based on International Labour Organization methods was 7.9% for the three months to August, up 0.3 over the previous quarter and up 2.1 over the year. Average earnings including bonuses increased 1.6% y/y in the three months through August. Average earnings excluding bonuses rose 1.9% y/y, the lowest rate since records began in 2001.
- The Japanese consumer confidence index excluding one-person households increased to 40.5 in September from 40.1 in August, indicating Japan's household sentiment climbed for a ninth consecutive month and reached a 23-month high, according to data from the Cabinet Office. The index has improved every month since December's record-low 26.2, adding to Japanese economic recovery signs; however, a number below 50 means pessimists outnumber optimists. Including one-person households, the consumer confidence index advanced to 40.7 in September from 40.4 a month earlier.
- Japan's domestic corporate goods prices were up 0.1% m/m in September after unchanged m/m in August, according to the Bank of Japan corporate goods price index. September CGPI fell 7.9% y/y, a ninth consecutive year-on year fall, following August's 8.5% y/y decrease.
- The Westpac-Melbourne Institute consumer sentiment index for Australia increased 1.7% m/m to 121.4 in October after rising 5.2% m/m to 119.3 in September, indicating Australian consumer confidence rose for a fifth consecutive month and reached the highest level in more than two years, according to a Westpac Banking Corp. and Melbourne Institute survey.
- China's exports fell 15.2% y/y in September, the smallest fall in nine months, while imports declined 3.5% y/y, the least in 11 months, the Customs Bureau said. The trade surplus narrowed to $12.93 billion in September from $15.7 billion in August.
- China's new local-currency loans rose to 516.7 billion yuan ($75.7 billion) in September from 410.4 billion yuan in August, the People's Bank of China said.
FX Strategy Update