- The dollar traded mixed on Thursday as risk appetite improved. The US trade deficit unexpectedly narrowed. Initial jobless claims rose more than expected, but continuing claims fell to the lowest level since February. The S&P 500 rose 6.40 to 1,102.35. The yen fell for the first day in four. The euro was little changed above the 1.47 support. Sterling traded narrowly higher after the Bank of England maintained its benchmark interest rate at a record-low 0.50% and kept its asset-buying program at £200 billion, as expected. The Australian dollar was supported by stronger-than-expected Australian employment growth. The Swiss franc rose modestly. The Swiss National Bank maintained its key rate at 0.25%, as forecast. The SNB said it will stop buying bonds, adding that it will curb an appreciation of the franc as long as the economic recovery is weak.
- The USD/CAD fell for a second day. Canada posted its first trade surplus in four months as imports fell and exports rose. The pair has fallen from 1.30 just before the beginning of March as stocks and commodities rallied. Having been trending lower since August, the USD/CAD is now forming a diagonal resistance line. If this resistance is broken, the pair will rally. There are important resistance in the 1.06-1.07 area and support in the 1.04 and 1.02 areas.
Financial and Economic News and Comments
US & Canada
- The US trade deficit unexpectedly shrank 7.6% m/m to $32.94 billion in October after a revised $35.65 billion trade gap in September, figures from the Commerce Department showed. Exports rose 2.6% m/m in October, a sixth consecutive gain, to $136.84 billion, the highest level since November 2008, from $133.38 billion in September. Imports increased 0.4% m/m to $169.78 billion, the highest level since December 2008, from September's $169.03 billion. Exports fell 8.6% y/y in October; imports dropped 18.8% y/y.
- US initial jobless claims in the week ending December 5 rose 17,000 to a higher-than-expected 474,000 from the previous week's unrevised 457,000, according to figures from the Labor Department. The 4-week moving average of new jobless claims declined 7,750 to 473,750, the lowest level since September 2008. Continuing claims in the week ending November 28 dropped 303,000 to 5,157,000, the lowest level since February 2009, from the preceding week's downwardly revised 5,460,000. The 4-week moving average of those continuing claims fell 123,500 to 5,416,500. The insured unemployment rate for the week ending November 28 declined to 3.9% from the prior week's 4.1%.
- The US government ran a $120.29 billion deficit in November, slightly smaller than November 2008's $125.29 billion shortfall, figures from the Treasury Department showed. However, the deficit totaled $296.65 billion so far in fiscal 2010, compared with $280.7 billion for the first two months of fiscal 2009.
- Canada's trade balance unexpectedly showed a surplus of C$428 million ($402 million) in October, the first trade surplus in four months, following a revised C$850 million deficit in September, according to data from Statistics Canada. Exports increased 3.4% m/m to C$31.1 billion in October, while imports fell 0.8% m/m, a third consecutive fall, to C$30.7 billion.
- German wholesale prices increased 0.7% m/m in November, the first gain in three months, after a 0.4% m/m decline in October, according to data from the Federal Statistical Office. November wholesale prices fell 3.2% y/y, easing the pace of decline from a 7.0% y/y October drop.
- The Conference Board UK leading economic index, a measure of future economic activity, advanced 1.0% in October to 96.5, a seventh straight monthly gain, after increases of 1.1% in both September and August, the Conference Board reported. The largest positive contributions to the October gain were from consumer confidence, the yield spread and volume of expected output. The coincident economic index, measuring current economic activity, was up 0.1% in both October and September, after a 0.1% decline in August. The October index stands at 102.7.
- Japan's private-sector machinery orders, excluding volatile ones, declined a seasonally adjusted 4.5% m/m in October, as forecast, after a 10.5% m/m gain in September, according to data from the Cabinet Office. October core machinery orders fell 21.0% y/y, following September's 22.0% y/y fall.
- Japan's domestic corporate goods prices unexpectedly grew 0.1% m/m in November, the first increase in four months, after a revised 0.8% m/m decline in October, according to the Bank of Japan corporate goods price index. November CGPI fell 4.9% y/y, an eleventh consecutive year-on year fall, following September's revised 6.8% y/y drop.
- Australia's median expected inflation rate rose to 3.6% in December from 3.2% in November, according to the latest Melbourne Institute survey of consumer inflationary expectations.
- Australia's seasonally adjusted employment surged a much more-than-anticipated 31,200 in November, a third consecutive gain, to 10,868,200, after an upwardly revised 27,200 rise in October, figures from the Australian Bureau of Statistics showed. The unemployment rate unexpectedly declined to 5.7% from 5.8%. Full-time employment jumped 30,800 to 7,627,400 in November while part-time jobs increased only 300 to 3,240,700. Unemployment fell 13,300 to 653,100. The participation rate slipped to 65.2% in November from 65.3% in October.
FX Strategy Update