- The dollar fell versus most major currencies as risk sentiment improved on dovish Fed comments and stronger-than-expected US existing-home sales. Federal Reserve Bank of St. Louis President James Bullard said the Fed should retain the flexibility to respond to any weakening in the economy by extending beyond March its authority to buy mortgage-backed securities and agency bonds. October existing-home sales climbed to the highest level since February 2007. The S&P 500 rose 14.86 to 1,106.24. Sterling advanced after testing the 1.65 support. The Australian dollar gained for the first day in five, finding support from the long-term uptrend. The Canadian dollar also rose for the first day in five as Canada's retail sales grew more than expected.
- The EUR/USD advanced on optimism for a stronger global economic recovery. In addition to improving US and Canadian macroeconomic data, the European PMI rose more than expected. Having been trading sideways for several weeks, the EUR/USD is currently between important support from the uptrend in the 1.48 area and resistance in the 1.50. If the resistance is broken, the uptrend will continue. However, a penetration of the support will point to a bearish EUR/USD outlook.
Financial and Economic News and Comments
US & Canada
- US existing-home sales jumped a much more-than-anticipated 10.1% m/m in October to a 6.10 million annualized rate, the highest level since February 2007, after a downwardly revised 8.8% m/m increase to a 5.54 million annualized pace in September, figures from the National Association of Realtors showed. Existinghome sales rose 23.5% y/y. The median price for an existing home was $173,100 in October, down 7.1% y/y. Inventories declined 3.7% at the end of October to 3.57 million available for sale, which represented a 7.0- month supply at the current sales pace, down from September's 8.0-month supply.
- The Chicago Fed national activity index declined slightly to -1.08 in October from -1.01 in September, indicating overall US economic activity leveled off last month, the Federal Reserve Bank of Chicago said. The index's 3-month moving average slid to -0.91 in October, the first decline this year, from -0.67 in September, indicating that growth in national economic activity remained below its historical trend, the Chicago Fed said.
- Canada's retail sales increased a more-than-expected 1.0% m/m in September to C$34.9 billion ($32.6 billion), the seventh gain in nine months, after an upwardly revised 1.0% m/m increase in August, according to data released by Statistics Canada. September retail sales decreased 3.3% y/y. The largest gain was at general merchandise stores, where sales grew 1.9% m/m in September, while sales at food and beverage stores rose 1.3% m/m and automotive sales increased 1.0% m/m. Excluding the automotive sector, retail sales advanced a more-than-expected 1.1% m/m in September to C$27.5 billion after an upwardly revised 0.7% m/m increase in August. Retail sales less autos in September declined 2.9% y/y.
- The eurozone composite PMI increased more than expected to 53.7 in November from 53.0 in October, indicating eurozone services and manufacturing industries expanded at the fastest pace since November 2007, according to flash November PMI data released by Markit Economics. The manufacturing PMI increased to 51.0 in November from 50.7 in October, while the services PMI advanced to 53.2 from 52.6.
- Germany's manufacturing PMI rose to 52.0 in November from 51.0 in October boosted by rising export orders, while the services PMI increased to 51.5 from 50.7, flash November PMI data from Markit Economics showed. The higher-than-expected gains in both key sectors pushed the preliminary composite PMI to a 3-month high of 53.5 in November from 52.3 in October.
- Australia's new motor vehicle sales grew 3.7% m/m to seasonally adjusted 81,122 units in October from 78,243 in September, the Australian Bureau of Statistics said. October new motor vehicle sales increased 3.3%% y/y.
- Thailand's GDP rose a seasonally adjusted 1.3% q/q in Q3 2009, a second quarterly gain, after a 2.3% q/q expansion in Q2, the National Economic and Social Development Board (NESDB) said. The economy shrank 2.8% y/y in Q3, the smallest contraction this year, following Q2's 4.9% y/y contraction.
FX Strategy Update