Dollar shines after an underwhelming summit

Timothy shuffling over to Europe and declaring that he had “a lot” of confidence in efforts by France and Germany to ramp up Euro-zone fiscal governance with proposed EU treaty changes seem to have done the trick. On the face of it, the Euro summit squeezed through an underwhelming “new” agreement alongside the EU treaty with a tougher deficit and debt regime to insulate the region against the debt crisis. China on the other hand could only come up with a +$300b investment vehicle. Will Geithner’s “strong arming” Europe pays off? The acid-test will be if such an agreement could ignite sustained recovery in appetite for Spanish and periphery bonds. Of course, the US has the Euros back; it’s in everyone’s interest that the Euro survives.

Below are some other highlights of the week:

AMERICAS

• USD:ISM non-manufacturing index fell to 52 in November from 52.9 a month earlier. Fifty is the dividing line between expansion and contraction.
• CAD: Canadian Building Permits surged +11.9%, supported by public sector offices and factories. Residential fell for the third consecutive month.
• CAD: No surprise from the BoC keeping rates on hold at +1%. The market had been expecting stronger ‘dovish’ remarks; however, they were not forthcoming. This managed to give the loonie a temporary lift. Governor Carney continues to suggest the uncertain outlook for growth. Subdued price pressures imply no need in a change in the Bank’s neutral monetary stance. Policy makers again highlighted in the report the damaging impact of the loonie.
• CAD: Ivey PMI was at 59.9 vs. 54.4 seasonally adjusted in November. The employment index was at 49.4, indicating employment was lower than in the previous month.
• CAD: Housing starts were down -13.3% to an annual rate of +181.1k in November, mostly due to a big drop in the multiples. This is the weakest reading for housing in 9-months.
• USD: US weekly claims fell -23k to +381k, a new nine-month low. Continuing claims also fell, easing-174k to +3.583m
• CAD: Canada recorded a surprise Trade balance deficit (-$885m vs. +vs. +$1b) in October, following a big month surprise surplus. The drop came mostly on the back of a -3% fall in exports (biggest decline in eight-months) and a +1.9% advance in imports.
• CAD: Labor productivity rebounded in Q3 (+0.4% vs. -1%) and labor costs declined by the biggest amount in a decade (-0.5%). This was the first drop in five-straight quarterly increases.
• USD: Preliminary December Michigan CSI reading of 67.7 beat market expectations of 65.5. The improvement was due mostly to expectations.

EUROPE Week in FX
ASIA Week in FX

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