• The dollar and yen fell on Thursday on improved risk appetite. The S&P 500 climbed 22.2 points to 976.29. The euro traded near a 7-week high against the greenback. Sterling was supported by better-than-expected UK retail sales and mortgage approvals. The Canadian dollar appreciated as the Bank of Canada said the Canadian recession is ending, forecasting Canada's economy will expand at a 1.3% annualized rate in Q3 2009. The AUD/JPY rose to the highest level in three weeks.
  • The USD/JPY jumped and broke the short-term downtrend as risk appetite increased and the Dow Jones Industrial Average closed above psychologically important 9,000 for the first time since January. The pair is likely to move higher and test the 97 area.

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Financial and Economic News and Comments

US & Canada

  • US existing home sales rose for a third straight month in June, rising a more-than-expected 3.6% to a 4.89 million annual rate, the highest level since October, from a revised 4.72 million in May, according to figures from the National Association of Realtors. June existing home sales declined only 0.2% y/y. Sales increased in all areas of the country. Sales also rose for both single-family units and condos/co-ops. The median price of an existing home increased to $181,800 in June but declined 15.4% y/y. Inventories of existing home sales declined 0.7% at the end of June to 3.82 million available for sale, representing a 9.4-month supply at the current sales rate following May's 9.8.

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  • US initial jobless claims increased 30,000 to 554,000 in the week ending July 18, the Labor Department said. The 4-week average of new claims declined 19,000 to 566,000, the lowest level since January 24. Continuing claims dropped 88,000 in the week ending July 11 to 6,225,000, the lowest level since April 11.

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  • Canada's GDP will grow at a 1.3% annualized pace in Q3 2009, revised up from a previously estimated 1.0% decline, marking the end of the Canadian recession that began in Q4 2008, the Bank of Canada said. This recovery isn't as robust as previous recoveries have been, BOC Governor Mark Carney said, explaining that the dollar is an important brake on the pace of growth.

Europe

  • The seasonally adjusted eurozone current account deficit narrowed to €1.2 billion in May from a revised €6.1 billion in April, the European Central Bank reported.
  • UK retail sales rose a more-than-anticipated 1.2% m/m in June after a downwardly revised 0.9% m/m decline in May, data from the Office for National Statistics showed. June retail sales gained 2.9% y/y.

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  • UK mortgage approvals rose to 35,235 in June, the highest level since March 2008, from 31,919 in May, indicating the UK property slump is easing, the British Bankers' Association reported.

Asia-Pacific

  • Japan's exports fell 35.7% y/y in June, the slowest decline rate this year, easing from a 40.9% y/y drop in May, while imports decreased 41.9% y/y following May's 42.4% y/y slide, figures from the Finance Ministry showed. The trade surplus widened to ¥508.005 billion ($5.4 billion) in June, the first expansion since October 2007, from ¥104.101 billion in June 2008.

FX Strategy Update