- The dollar fell on Wednesday as risk aversion decreased. In early trading the greenback tested its resistance level against major currencies supported by continued debt worries as Spain's credit outlook was downgraded. The USD later lost steam in late New York trading as US stocks reversed earlier losses. The S&P 500 rose 4.01 to 1,095.94. Strong wholesale-inventory data boosted the recovery outlook. The yen rose for a third day. Japan's GDP was revised sharply lower for Q3 2009. The euro reversed earlier losses and traded slightly above the 1.47 support in late trading. The GBP/USD fell below the 1.62 support in early New York trading as UK Chancellor of the Exchequer Alistair Darling imposed a 50% levy on large bank bonuses and said he will increase income taxes; however, the pair climbed back above 1.62 in late trading. The Canadian dollar was up modestly and unable to penetrate support.
- The AUD/USD rose for the first day in five, finding support in the 90 area. The long-term uptrend has been broken and there is a small head-and-shoulder, indicating a test of the 87-area support. On the positive side, the pair is short-term oversold. We have been long the pair since 0.6601 and will play out our stop at 0.8770.
Financial and Economic News and Comments
US & Canada
- US wholesale inventories unexpectedly advanced 0.3% m/m to 379.6 billion in October, the first increase since August 2008, after an upwardly revised a 0.8% m/m decline in September, according to data from the Commerce Department. Wholesale sales increased 1.2% m/m to $326.2 billion after September's upwardly revised 1.3% m/m advance, suggesting the US economic recovery is steadily progressing. The inventories/sales ratio was 1.16 in October, down from 1.17 in September and October 2008's 1.22. Inventories fell 13.5% y/y in October; sales fell 9.6% y/y.
- Germany's consumer prices declined 0.1% m/m in November but increased 0.4% y/y, final November CPI data from the Federal Statistical Office showed, revised slightly upward compared with November 26 CPI estimates. The harmonised index of consumer prices for Germany declined 0.2% m/m in November while the HICP rate advanced to 0.3% y/y, the first year-on-year increase in seven months, from October's -0.1% y/y. The HICP numbers were revised slightly downward.
- Germany's seasonally adjusted exports increased a more-than-expected 2.5% m/m in October after a downwardly revised 3.6% m/m gain in September, while seasonally adjusted imports unexpectedly declined 2.4% m/m following September's 5.8% m/m rise, figures for the Federal Statistical Office showed. Exports fell 15.9% y/y nsa in October; imports fell 15.3% y/y nsa. The trade surplus widened to €13.6 billion ($19.98 billion) in October from a downwardly revised €10.4 billion in September. The current account surplus rose to €11.0 billion from September's downwardly revised €9.3 billion.
- The UK deficit on trade in goods and services widened more than expected to £3.2 billion ($5.2 billion) in October from a revised £3.1 billion deficit in September (originally reported as a £3.5 billion deficit), while the deficit on trade in goods widened to £7.1 billion from September's revised £6.9 billion deficit (originally reported as a £7.2 billion deficit), according to figures from the Office for National Statistics. Exports increased £0.9 billion and imports increased £1.1 billion. The deficit with EU countries grew to £3.6 billion in October from a £3.2 billion deficit in September, while the deficit with non-EU countries shrank to £3.5 billion from September's £3.8 billion deficit.
- Switzerland's seasonally adjusted unemployment rate was unchanged at 4.1% in November, while the non seasonally adjusted unemployment rate rose to 4.2% from October's 4.0%, the State Secretariat for Economic Affairs said.
- Japan's GDP grew at an annualized 1.3% rate in Q3 2009, revised downward from a previously reported 4.8%, after a 2.7% pace in Q2, final Q3 GDP data from the Cabinet Office showed, registering a second consecutive expansion after Japan's deepest postwar recession. The downward revision was partly due to weak capital spending. The Q3 GDP increased 0.3% q/q, revised downward from a previously reported 1.2% q/q, following Q2's 0.7% q/q increase. The Q3 GDP contracted 5.1% y/y.
- Australia's trade deficit unexpectedly widened to A$2.38 billion ($2.15 billion) in October from an A$1.85 billion deficit in September, figures from the Australian Bureau of Statistics showed.
- Australia's home-loan approvals declined a less-than-expected 1.4% m/m to 63,865 in October after a downwardly revised 3.3% m/m increase in September, according to figures from the Australian Bureau of Statistics. The total value of loans declined 1.4% m/m to A$23.312 billion ($21.07 billion) in October. The value of lending for owner occupied housing fell 1.7% m/m to A$17.176 billion while the value of lending for investment slipped 0.6% m/m to A$6.136 billion.
- The Reserve Bank of New Zealand maintained the official cash rate at 2.50%, as forecast. RBNZ Governor Alan Bollard said the New Zealand economy continues to recover but there remains considerable uncertainty about the durability of the expansion.
FX Strategy Update