- The dollar traded mixed on Monday, higher against the yen and commodity currencies but lower versus the euro. The greenback was supported by increasing risk aversion as a trade dispute between China and the US increased the threat of protectionism. The S&P 500 was up 6.61 points to 1,049.34. The euro rose despite the declines in eurozone industrial production and employment. Sterling was pressured by a report predicting the UK housing slump will resume next year. The Australian dollar fell for a second day and the Canadian dollar declined.
- The USD/JPY rose for the first time in five days, supported by intervention threats. Japan's Finance Minister Yasutake Tango said officials are paying close attention to the yen. In addition, Goldman Sachs said it does not see a prolonged USD/JPY weakness. The trend is certainly negative, but the pair is oversold measured by the RSI and also near the important 90-area support. Therefore, we expect the USD/JPY to move sideways or higher this week.
Financial and Economic News and Comments
US & Canada
- Canada's capacity utilization rate posted an eighth consecutive quarterly drop in Q2 2009, declining to 67.4%, the lowest level since records began in 1987, from an upwardly revised 70.2% in Q1, Statistics Canada reported. Manufacturing capacity use fell for a fourth straight quarter, falling to 64.2% from Q1's 67.1%.
- Canada's national net worth declined 1.1% to C$5.9 trillion ($5.4 trillion) in Q2 2009, Statistics Canada said. However, household net worth increased 2.6% to C$5.6 trillion in Q2, driven by a nearly 20% gain in the Standard and Poor's / Toronto Stock Exchange composite index.
- Eurozone employment fell 0.5% q/q (702,000 persons) in Q2 2009, a fourth consecutive quarterly decline, after an upwardly revised 0.7% q/q decrease in Q1, according to data from Eurostat. Employment dropped 1.8% y/y, following Q1's 1.2% y/y slide.
- Eurozone industrial production fell 0.3% m/m in July, as forecast, after an upwardly revised 0.2% m/m decline in June, data from Eurostat showed. July industrial production decreased a less-than-expected 15.9% y/y, easing the pace of decline following June's upwardly revised 16.7% y/y drop.
- The eurozone economy may grow 0.2% in Q3 2009 and 0.1% in Q4 after a 0.1% decline in Q2, according to the European Commission's economic forecasts. The economy may contract 4.0% in 2009 as a whole, the EC predicted, maintaining its May forecast.
- Switzerland's producer and import prices increased 0.1% m/m in August, the first month-on-month gain since July 2008, after remaining on average stable m/m in July and June, the Swiss Federal Statistical Office reported. The August increase was driven by a 0.3% m/m advance in import prices; on the other hand, producer prices remained stable m/m. August producer and import prices fell 5.5% y/y, attributable to the sharp year-on-year decline in prices for petroleum and metal products, following July's 6.1% y/y drop. The August figures came in as we forecast.
- Japan's industrial production growth was revised upward to 2.1% m/m for July from a preliminarily reported 1.9% m/m, after June's 2.3% m/m, according to final July IP data released by the Ministry of Economy, Trade and Industry. The July IP index stood at 82.6. Industrial production fell 22.7% y/y, revised from a preliminarily reported 22.9% y/y decrease, following June's 23.5% y/y drop. Capacity utilization rose 3.9% m/m to stand at 77.2 in July after a 2.3% m/m increase in June.
FX Strategy Update