The Dollars in Motion

The big dollar found its sea legs, at least temporarily, after Friday’s UoM consumer sentiment index and the Conference board’s leading indicators both exceeding the streets estimates. The currency was propelled higher outright to the EUR and was able to add to its gains against most major currencies. With the general lack of liquidity and varying degrees of market participation, due to the different holiday schedules being respected, the sustainable market moves are yet to come. The benign Canadian CPI data should mean that there is no pressure on the BoC, which it has signaled since April that it may raise interest rates, to act any time soon.

Below are some other highlights of the week:

Americas

• USD: US July producer prices rose +0.3%, in line with expectations, but core prices were up a solid +0.4%, above expectations for an above the expectations of a +0.2% gain. Despite crude costs stabilizing, energy costs unexpectedly put together a fourth consecutive negative contribution (-0.6%). Even with the core rising, the y/y prints eased to +2.6% vs. +2.5%.
• USD: July headline and ex-retail sales reported +0.8%, m/m and easily beat a forecast of +0.3%. However, the June print was revised down to -0.7% from -0.5%. The strong gain averted a fourth consecutive negative headline.
• USD: Empire manufacturing activity contracted this month for the first time in nearly a year. The index plunged down 13 points to -5.85 from +7.39 in July. The index has been deteriorating since May. The decline is sure to revive the health of the US factory sector. Most of the sub-indexes worsened like new orders and shipments. Labour was mixed.
• USD: US Consumer prices remained flat in July the fourth consecutive months that the costs did not increase and proof that inflation pressures are contained. Prices grew a very mild +1.4% from a year earlier, the smallest annual gain in two and a half years. Ex-food and energy and costs increased +0.1%, m/m and +2.1%, y/y.
• USD: US Industrial output picked up last month (+0.6%), as contained gains in manufacturing activity provided an encouraging sign for a struggling economy.
• USD: US July Capacity Utilization up +0.4% at 79.3% as expected.
• USD: US building permits up +6.8% to +0.812k and housing starts ease -1.1% in July.
• The number of US workers filing applications for jobless benefits rose last week (+364k vs. +361k), though the overall trend for claims suggests that the labour market has improved slightly since early summer. The 4-week moving average fell by -5.5k to +363k.
• USD: The Philly Fed reports manufacturing activity improves but still contractionary in August (-7.1 from -12.9 in July).
• CAD: Canadian factory sales fell unexpectedly in June for the fourth time in six months (-0.4% to +$48.9b).
• CAD: Foreign investments in Canadian securities fell in June by the most since Oct. 2007 (non-residents sold -7.89b after adding a monthly record +261b in May) following two consecutive months of purchases.
• CAD: Canadian monthly CPI fell unexpectedly last month (-0.1%, m/m, to +1.3% headline and core +1.7%). The tame inflation figure means that there is no pressure on the BoC, which it has signalled since April that it may raise interest rates, to act any time soon.
• USD: UoM consumer sentiment survey recorded a slight rebound in the preliminary August reading, rising from 72.3 to 73.6. That is the first rise in three months and it still falls short of May’s 79.3 reading.

EUROPE Week in FX

ASIA Week in FX

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