Market Gives Thanks for a Stronger Dollar

In the US, it was a holiday shortened trading week. Thanksgiving stuck near the end of the week has created a thin post market. All the Euro toxic headline prints have created a bias towards light trading, dominated by risk aversion trading strategies. 

This week is no different than the past three weeks with most market participants trading in the dark. Merkel again has refused the concept of using Euro-bonds. She has ruled out joint euro-area borrowing and an expanded role for the ECB in fighting the debt crisis after the failed 10-year Bund auction. Credit rating agencies are once again trigger happy, pulling the ‘Junk card’ on Portugal and Hungary. This is only promoting systemic risk fear amongst the Euro “core”, while the Hungary nod will only hurt the other EC3 countries. North America will have full trading desks come Monday and it’s then we will get to see what the ‘White Summit’ is all about.

Below are some other highlights of the week:

Americas

• CAD: Canadian Wholesale trade increased for a fifth consecutive month in September, rising +0.3% to $48.7b. In volume terms, wholesale sales fell -0.5% in September.
• CAD: Canadian retail sales rose twice as fast as economists forecast in September on purchases of new trucks and higher gas prices. Sales grew +1% to a seasonally adjusted C$38.2 b, the fastest pace in 12-0months.
• USD: GDP climbed at a +2% annual rate from July through September, less than projected and down from a +2.5%. Gains in retail sales, manufacturing and housing this quarter, combined with lean inventories, raise the odds the world’s largest economy will pick up. However, US unemployment (+9.1%) and stagnant wages suggests that spending has been fueled by reductions in “domestic savings”. This should cast doubt on whether increases will be sustainable going into next year.
• USD: The FOMC minutes showed that some policy makers considered easing policy further. “It was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative.”
• USD: Durable goods orders fell last month as demand for aircraft and business equipment cooled, suggesting a slowing global economy may temper demand to manufacturers (-0.7% vs. -1%).
• USD: Consumer spending rose less than forecasted in October as Americans used the biggest gain in incomes in seven-months to rebuild savings (+0.1% vs. a prior +0.7% gain). This will be worrisome for the Fed who is relying on the consumer to ignite US recovery.
• USD: Weekly claims recorded more Americans filing for unemployment benefits last week, a sign that the labor market is taking time to gain traction. Applications for jobless insurance increased +2k to +393k.
• CAD: BoC Governor Mark Carney’s comments that he can be “flexible” in bringing inflation back to target are leading some investors to bet he will not raise interest rates for two-years (+1%).
• USD: Celebrated Thanksgiving, their biggest holiday of the year-retail now look forward to “cyber” Monday for indication on how strong

 
Other Links:
EUROPE Week in FX
ASIA

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