World leaders may be calling for the importance of a strong US Dollar; however Dollar weakness inadvertently gave the US economy a boost in the month of August after US Trade balance figures on Friday showed the trade deficit unexpectedly dropped 3.6 percent to $30.71b, compared with the downwardly revised $31.85b for July. Despite higher commodity prices, a weaker dollar provides stimulus to exports as US goods become more cost-effective for overseas buyers.
This news gave the greenback some buoyancy against major counterparts; however it couldn't compete with the Canadian Dollar which was given a leg up from positive jobs data. The economic outlook in Canada has been stepped up with jobs data on Friday showing 30,000 newly created jobs for the month of September, well up from expectations of 5,000 new jobs. This now takes the unemployment rate down to 8.4 percent from 8.7 percent in August.
The Greenback also found strength as Fed Chairman Bernanke affirmed the measures taken in relation to the Fed's stance on monetary and fiscal stimulus, but acknowledged the importance of the removal of economic 'training wheels' as a recovery gathers pace. Bernanke stated as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.
UK economic figures on Friday showed the trade deficit narrowed to GBP6.2b for August compared to the downwardly revised GBP6.4b for July. With a consensus of a GBP6.3b deficit, the market found little comfort as the finer points of the data showed both imports and exports declined 0.6 percent and 1.2 percent respectively, thus reducing the trade deficit.
Despite greenback strength on Friday, the Aussie dollar has been able to maintain its perch above US$.9000 currently trading at US$.9035, in line with Fridays close. Long weekends for the US, Canada and Japan suggest a slow start to the week, with no major economic data due locally.