Past events:
• USD Unemployment Claims out at 462K, versus expected 456K, prior 468K
• USD Trade Balance out -37.3B versus expected -40.9B, prior -39.9B
• CAD Trade Balance out 0.8B, versus expected 0.3B, prior 0.1B
• CHF Libor Rate out a 0.35%, versus expected 0.25%, prior 0.25%
• GBP Consumer Inflation Expectations out at 2.5%, versus prior 2.4%
Upcoming Events:
• EUR Industrial Production (1000GMT)
• CAD Employment Change (1200GMT)
• CAD Unemployment Rate (1200GMT)
• USD Core Retail Sales m/m (1330GMT)
• USD Retail Sales m/m (1330GMT)
• USD Prelim U-M Consumer Sentiment (1455GMT)
Market Commentary:
The U.S Dollar fell against most of its major counterparts after a report on U.S. trade indicated the global economic recovery may be slowing, reducing demand for higher-yielding assets.
The U.S trade deficit narrowed unexpectedly by 6.6% in January, as demand for foreign oil and automobiles dropped. The deficit fell to $37.3 billion from a revised $39.9 billion in December as Americans imported the fewest barrels of crude oil in a decade. Exports fell 0.3%, the first decline since April, on fewer shipments of commercial aircraft and autos. In addition, the U.S. trade deficit with China narrowed to $18.30 billion compared with $20.57 billion in the same month last year.
Across the border Canada’s trade balance grew more than expected in January to 0.8B, as higher prices for commodities such as gold boosted exports, while imports fell. According to the figures released by Stats Canada January’s surplus was the largest since March 2009. The pace of growth in exports slowed, as volumes fell 0.3%, on the back of smaller sales of autos as well as machinery and equipment. The Canadian dollar has risen about 25% against its U.S. counterpart over the past 12 months, making the country’s goods more expensive abroad leading to its decline in exports. However, this was offset by a 0.8% jump in prices, led by industrial goods and materials including precious metals, aluminum and alloys.
Despite beating market expectations, the Canadian Dollar fell against 14 of its 16 major currency counterparts, as the event was overshadowed by the unforeseen 6.6% fall in the U.S trade deficit. The Loonie weakened as much as 0.7% to C$1.0322 per U.S. dollar from C$1.0292, prior to announcement of the trade balances.
The number of Americans filing first-time claims for jobless benefits fell for a second week to a level that suggests companies are nearing the end of payroll reductions as the economy recovers. Yesterday the U.S Labor Department figures showed that first-time unemployment applications dropped by 6,000 to 462,000 in the week ended March 6. The number of people receiving unemployment insurance increased, while those getting extended benefits fell. This is the first piece of employment data following Non-Farm Payrolls for February, announced last week. Unemployment in the U.S. held steady at 9.7% as payrolls declined by 36,000 -both figures were lower than economists had forecast.
This afternoon (1330GMT), the US census bureau will release its retail sales and core retail sales for February. Sales were stronger than expected last month, as retail sales rose 0.5% between January and December and the core sales (excluding automobiles) increased by 0.6%. Analysts predict that the unseasonably cold weather throughout February will most likely hamper any growth in the sales volume. The market predicts that the retail sales will fall 0.1% (core is expected to rise by 0.1%).
Later today, the University of Michigan will release its prelim consumer sentiment- a survey of about 500 consumers which asks respondents to rate the relative level of current and future economic conditions. The UoM index has been stable for the past three months, remaining almost unchanged at a score of 73.6. A small rise to 74.3 points is expected this time. As the timing of the release occurs right before the market closes for the week, the announcement should generate a lot of activity for the U.S. dollar.
At noon today (1200GMT), Statistics Canada will release the unemployment rate for February. Last month, the number of employed Canadian’s increased by 43,000, more than three times market expectations – pulling the unemployment rate down to 8.3%, its lowest level since May of last year. The unemployment rate is expected to remain unchanged at 8.3%, as the market predicts that number of employed people will rise by 17,500, supplying a strong week ending for the Canadian dollar.
Across the Atlantic, the U.K. inflation expectations climbed to the highest since November 2008, putting an end to the Pound’s three-day bearish streak. The BoE consumer inflations expectations rose to 2.5% in February, fueling speculations that the central bank may opt for an interest rate hike in the near future. Following the report, the GBP appreciated against all of its 16 major currency counterparts, rising 0.5% against the USD to $1.5046, and 0.4% against the Euro to 90.79 pence per euro.
The Swiss franc weakened from its strongest level against the Euro in a year after the central bank said it will “act decisively” to prevent an “excessive” appreciation of the currency. Yesterday, the Swiss National Bank maintained its benchmark interest rate at near zero in order to push the country out of its worst economic recession in over three decades. Yesterday, the SNB opted to keep its target band for the 3-month Swiss Franc LIBOR between 0.00-0.75%, and to leave its key interest rate at its current level of 0.25%.
The CHF strengthened 1.4% versus the Euro this year, and today reached the highest level since the Swiss National Bank began selling the nation’s currency in March 2009 to curb its gains. The central bank, which kept its three-month Libor target rate in line with analysts’ forecasts, said the trade-weighted value of the franc increased and most of the franc’s gains were due to the euro’s weakness.
Following the interest rate announcement, the franc slipped almost 0.1% against to 1.4620 per euro, after earlier appreciating to 1.4602, the strongest level since March 10, 2009. It was 0.2% weaker versus the dollar at 1.0716.
Written by Finexo.com
