- The dollar rose on Thursday ahead of US employment data after China tightened its monetary stance. China surprised the markets by selling 3-month bills at a higher interest rate; consequentially, lowering investor risk appetite and strengthening the greenback. US initial jobless claims grew only 1K to a lower-than-expected 434K. The S&P 500 rose 4.55 to 1,141.69 on reports of US retailers' better-than-estimated holiday sales. The yen fell versus all major currencies after Japan's new Finance Minister Naoto Kan said he hopes the yen will correct a bit more. The euro was pressured by mostly weaker-than-expected EMU data. The Australian and Canadian dollars declined modestly on weakness in commodity prices following China's tightening. Strongerthan- expected Australian retail sales increased speculation the Reserve Bank of Australia will raise interest rates for a fourth time; thus, limiting the aussie's decline.
- The GBP/USD fell on Thursday. The Bank of England left its key interest rate at 0.50% while leaving its £200 billon quantitative easing program unchanged, as expected. The pair is trading below its 200-day moving average again and looks top heavy. There is resistance from the 200-day moving average and from the downtrend in the 1.61 area. Support exists in the 1.58-1.59 area. If this support is broken, the next support will be in the 1.53 area.
Financial and Economic News and Comments
US & Canada
- US initial jobless claims increased just 1,000 to a lower-than-expected 434,000 in the week ending January 2 from the previous week's upwardly revised 433,000 that was a 16-month low, data from the Labor Department showed. The 4-week moving average of new jobless claims fell 10,250 to 450,250, the lowest level since September 2008. Continuing claims in the week ending December 26 dropped 179,000 to 4,802,000, the fewest in almost a year, from the preceding week's unrevised 4,981,000. The 4-week moving average of those continuing claims fell 95,250 to 5,005,750. The insured unemployment rate for the week ending December 26 declined to 3.6% from the prior week's 3.8%. ?
- Canada's Ivey PMI fell to a lower-than-expected 48.4 in December from 55.9 November, indicating purchases in Canada's public and private sectors were lower than the prior month, according to data from the Richard Ivey School of Business and the Purchasing Management Association of Canada.
- The eurozone economic sentiment rose to a higher-than-expected 91.3 in December from 88.8 in November, indicating eurozone economic confidence rose for a ninth straight month to the highest level since June 2008, data from the European Commission showed. Consumer confidence continued to improve in December, with the consumer confidence gauge increasing to -16, as forecast, from November's -17. Industrial confidence advanced to -16 in December from -19 in November. Confidence in the services sector improved for a ninth straight month in December, with the services confidence measure increasing to -3, as forecast, from November's -4. In a separate measure of business confidence released by the EC, the business climate indicator also climbed for a ninth consecutive month in December to -1.22 from -1.53 the prior month.
- Eurozone retail sales fell 1.2% m/m in November, the third fall in four months and matching the record monthon- month fall in October 2008 and 2001, after an upwardly revised 0.2% m/m increase in October, data from Eurostat showed. November retail sales fell 4.0% y/y, an 18th consecutive year-on-year drop and the sharpest in nine months, following October's revised 1.3% y/y decline.
- Germany's retail sales unexpectedly fell 1.1% m/m in November, the first fall in three months, after a downwardly revised 0.0% m/m in October, according to data from the Federal Statistical Office. November tetail sales fell 2.8% y/y, following October's revised 1.6% y/y decline.
- Germany's seasonally adjusted manufacturing orders increased a less-than-expected 0.2% m/m in November after a revised 1.9% m/m decline in October, data released by the Federal Ministry of Economics and Technology showed. November manufacturing orders grew a non-seasonally adjusted 1.8% y/y, the first yearon- year gain since April 2008, following October's revised 8.2% y/y decrease.
- UK house prices grew a more-than-expected 1.0% m/m in December, a sixth consecutive month-on-month gain, to an average of £169,042 ($269,360), after a downwardly revised 1.3% m/m increase in November, according to a Halifax report. December house prices rose 5.6% y/y, the second year-on-year rise since February 2008. House prices increased 1.1% y/y in the three months through December, the first gain since March 2008, following a 1.6% y/y decline in the three months through November.
- Australian retail sales rose a more-than-expected 1.4% m/m in November, the largest gain in eight months, to a seasonally adjusted A$20.08 billion ($18.43 billion), after an upwardly revised 0.4% m/m increase in October, according to data from the Australian Bureau of Statistics. November retail sales rose 7.0% y/y nsa.
- Australia's trade deficit narrowed more than expected to A$1.70 billion ($1.56 billion) in November from a revised A$2.08 billion in October, figures from the ABS showed. Exports declined 2.0% m/m to A$19.03 billion in November; however, iron ore and farm exports both increased 5.0% m/m. Imports fell 3.0% m/m to A$20.73 billion.
FX Strategy Update