FX Highlights

  • USD is trading mixed to firmer with investors not sure how to trade improving US economic data, will USD be supported by US recovery or pressured by improving risk appetite? Will concern about the strength of the US recovery and threat of double-dip recession spark safe haven demand for USD? US consumer demand will likely remain weak, US recovery speculation is unlikely to take to USD much higher, USD is also vulnerable to rising US deficit as the Obama administration raises its 10 year deficit forecast by 2 trln
  • USD firmed after report that Colonial Bankgroup files for bankruptcy and stocks turned lower, USD also supported by report that China will take steps to curb excess capacity, GBP pressured by declining UK bond yields and selling in cross trade to EUR and JPY, EUR rises after the release of better than expected German IFO but fails to hold gains after the release of weaker German Q2 GDP and downplaying of the EU recovery outlook by ECB officials, commodity currencies pressured by weaker European and US equity market trade and uncertainty about the global recovery, CAD pressured by threat of intervention as BOC officials expressed concern about CAD strength
  • Focus turns to today's release of durable goods and new home sales
  • Japan's July corporate service price index falls 0.2%, July trade balance narrows to Â¥380.2 bln, August small business confidence index rises to 41.8, JPY lower
  • Australia's Q2 construction work done falls 0.1%, a 4% decline was expected, AUD lower
  • German IFO for August rises to 90.5 from 87.4 last month, current conditions rise to 86.1 from 84.4 expectations rise to 95 from 90.4, IFO officials say it is not certain that the economic recovery is sustainable, EUR lower
  • BOC's Lane sees end of Canada's recession but he expressed concern about strength of the CAD, according to Lane Canada's economy is expected to start to grow this quarter along with the global economy but the recovery will be muted, CAD lower
  • BOE Bean says that the impact of quantitative has been mildly encouraging and bond yields would be 50 to 75 bps higher if not for the government bond purchases, GBP lower pressured by the supporting gilt auction and selling in cross trade to the EUR sparked by speculation the UK recovery will lag behind the EU, GBP lower
  • The Obama administration says unemployment will rise to 10% by end of 2009 and 2010 budget deficit will be 1.5 trln, raises estimate for ten year deficit to 9 trln
  • California inventory of homes dropped to 3.9 months form 6.9 months with house prices rising for the fifth straight month
  • California's Colonial Bankgroup files for Chapter 11
  • US equity markets set to open lower, European equities lower, Nikkei closed 142 points higher

Upcoming Events

  • US- Wednesday, August durable goods will be released expected to rise 1.7% compared to a 2.2% decline last month along with July new home sales expected to rise to 390k from 384k last month
  • CAN- Wednesday, no major Canadian economic data is due for release today