Dollar Falls as Risk Sentiment Improves

Financial and Economic News and Comments

US & Canada

• The ISM US manufacturing index rose to a higher-than-expected 55.9 in December from 53.6 in November, indicating US manufacturing activity expanded for a fifth consecutive month and reached the highest level since April 2006, according to data from the Institute for Supply Management. The index's key components remained above the 50 growth level in December, signaling sustained expansion in the manufacturing industry. The new orders index rose to 65.5, the highest level in five years, from 60.3. The production index advanced to 61.8 from 59.9. Employment expanded for a third consecutive month in December, with the employment index increasing to 52.0 from November's 50.8. Inflation grew at a faster pace in December, with the prices paid index rising to 61.5 from 55.0.

• US construction spending slid a more-than-expected 0.6% m/m in November, a seventh straight fall, to a seasonally adjusted $900.08 billion annual rate, the lowest level since July 2003, after a downwardly revised 0.5% m/m decline to $905.6 billion in October, according to figures from the Commerce Department. November construction spending fell 13.2% y/y. Both private and public constructions slid in November, declining 0.7% m/m to $581.2 billion and 0.4% m/m to $318.8 billion, respectively. Private residential construction fell 1.6% m/m, the most since June, to a seasonally adjusted $250.7 billion annual rate in November, after a 4.8% m/m gain in October, while private nonresidential construction was at a seasonally adjusted $330.5 billion annual pace, nearly the same as October's revised $330.6 billion annual rate.

Europe

• The Sentix eurozone investor sentiment index increased to -3.7 in January from -5.5 in December, indicating eurozone investor confidence climbed for a sixth consecutive month and reached the highest level since June 2008, data released by Sentix showed. The current situation index improved to -17.5 from -19.5. The expectations index increased to 11.25 from 9.5.

• The eurozone manufacturing PMI increased to an unrevised 51.6 in December from 51.2 in November, final December manufacturing PMI data from Markit Economics showed, indicating eurozone manufacturing activity expanded to the highest level since March 2008.
• The manufacturing sector in Germany continued its expansion last month. The German manufacturing PMI advanced to 52.7 in December from 52.4 in November, according to final December manufacturing PMI data from Markit Economics, revised down from a previously reported 53.1.
• The UK manufacturing PMI climbed to a higher-than-expected 54.1 in December from 51.8 in November, indicating the UK manufacturing sector expanded to its highest level since November 2007, according to data from Markit Economics and the Chartered Institute of Purchasing and Supply.
• UK mortgage approvals rose more than expected to 60,518 in November, the highest level since March 2008, from an upwardly revised 57,718 in October, according to a report from the Bank of England. Net lending to households jumped to a higher-than-expected £1.083 billion ($1.74 billion) in November, the largest amount since April 2009, from £508 million in October. Mortgage lending rose to £1.459 billion from October's £1.01 billion. Consumer credit fell by £376 million in November after falling by £591 million the prior month.
• Switzerland's SVME PMI declined to a lower-than-expected 54.6 in December from 56.9 in November, indicating Switzerland's manufacturing sector expanded for a fifth consecutive month but at a slower pace, according to a survey from the Swiss Association of Purchasing and Materials Management and Credit Suisse.

Asia-Pacific

• The Australian Industry Group-PricewaterhouseCoopers Australian performance of manufacturing index declined to 48.5 in December from 51.2 in November, indicating Australia's manufacturing sector contracted for the first time following four consecutive months of expansion, the AiG and PwC reported. The production index slid to 46.6 in December, showing the first decline in production in five months, from 54.0 in November. New orders contracted slightly in December after four straight months of growth, with the new orders index declining to 48.6 from November's 51.9. The employment index declined to 50.8 in December from 53.7 the prior month, indicating manufacturing employment expanded for a second month but at a slightly slower pace.

• The HSBC/Markit China manufacturing PMI rose to 56.1 in December from 55.7 in November, indicating China's manufacturing activity rose above the 50 expansion level for nine consecutive months and reached the highest level since April 2004, according to today's report from HSBC Holdings Plc and Markit Economics. The Chinese government PMI, released on January 1, showed the largest manufacturing expansion in 20 months.

FX Strategy Update

 
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
EUR/JPY

Primary Trend
Positive
Negative
Positive
Negative
Negative
Positive
Neutral

Secondary Trend
Negative
Positive
Negative
Positive
Neutral
Negative
Neutral

Outlook
Negative
Positive
Negative
Positive
Positive
Negative
Neutral

Action
Sell
Buy
Sell
Buy
None
None
None

Current
1.4417
92.50
1.6094
1.0293
1.0410
0.9126
133.40

Start Position
1.4628
88.67
1.6440
1.0340
N/A
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
1.4590
87.30
1.6250
N/A
N/A
N/A
N/A

Support
1.4200
90.00
1.5900
1.0250
1.0400
0.8750
128.00

1.4000
87.00
1.5800
1.0050
1.0200
0.8600
126.00

Resistance
1.4450
92.80
1.6200
1.0600
1.0700
0.9150
135.00

1.4550
94.50
1.6550
1.0900
1.1000
0.9400
138.00