US Data Starting Its Own Trend?

Stronger data in the US persists; not a trend yet, but certainly something to keep policy makers happy in this climate of Euro unpredictability. US retail sales are starting the quarter surprisingly stronger than anyone would have estimated back in August, at the depth of the recession fears. We are also witnessing slower inflation in the pipeline in both Canada and the US.

The Fed this month renewed their pledge to hold the benchmark interest rate near zero, at least through the middle of 2013, so long as joblessness stays high and the inflation outlook is “subdued.” The CAD, which is presently outperforming other growth and interest rate sensitive currencies due to its proximity to its largest trading partner, the US, has managed to pare its weekly drop. This has been achieved on the back of its own inflation report reducing speculation that the Bank of Canada will cut borrowing costs to support the economy.

Below are some other highlights of the week:

AMERICAS

• USD: The Commerce department reported a +0.5% increase in Retail Sales, compared with the median economist forecast that called for +0.3% growth.
• USD: Manufacturing in the NY region unexpectedly expanded this month, as measures of shipments and the employee workweek improved. Empire State Manufacturing rose to 0.6, the first positive reading in six-months, from -8.5 in October.
• USD: Prices paid to wholesalers fell last month by the most in four-months as the cost of energy and automobiles decreased, pointing to “waning inflation”. It declined a more than projected -0.3% after a +0.8% gain in September.
• CAD: Manufacturing sales rose for a third consecutive month in September (+2.6% vs. +1.4%), advancing twice as fast as forecasted, on gains by petroleum refineries and transportation products.
• USD: Industrial output rose more than expected in October as factory and mining production expanded strongly, suggesting the economy was gaining steam. IP rebounded +0.7% last month, this after -0.1% in the prior month. October’s increase was the largest in four-months.
• USD: The cost of living unexpectedly fell in October for the first time in four-months, a sign that inflationary pressures may be starting to recede. CPI declined -0.1% from the prior month after a +0.3% rise. The core-rate (ex-food and energy) rose +0.1%, matching September as the smallest gain this year. Again, no concern for the Fed.
• USD: Septembers TIC data showed foreign residents increasing their holdings of long-term US securities-net purchases of +$65.8b’s worth. Net purchases by private foreign investors were +$28.5b, and net purchases by foreign official institutions were +$37.3b.
• USD: Housing data surprised to the upside. Builders broke ground on more homes than forecasted last month (+0.63m) and construction permits (+0.65m) climbed to the highest level since March 2010. Encouraging signs that the housing may become less of a “laggard” in the third-year of the recovery.
• USD: Applications for jobless benefits decreased -5k last week to +388k (lowest in seven-months). Median estimates had forecasted +395k claims. Analysts expect with firings somewhat diminishing, companies may add to payrolls at a faster pace as demand picks up.
• CAD: Foreign investors added +$7.4b of Canadian securities to their holdings, led by acquisitions of T-bills. Canadian investment in foreign securities slowed to +$718m and remained focused on foreign equities. A reason why the loonie has outperformed other growth and interest rate sensitive currencies.
• USD: First disappointment of the week, Philly Fed decreased to 3.6 this month from 8.7 in October.
• CAD: CPI moderated in October from a near three-year high in September (+2.9% vs. +3.2%), mostly on the back of gas prices slowing, y/y. This will take pressure off the BoC, sticking to their low interest rate policy.
• USD: Leading indicators increased +0.9% in October to 117.4, following a +0.1% increase in the prior month. This was largely due to a sharp pick-up in housing permits and would suggest that the risk of an economic downturn has receded.

Other Link:
EUROPE Week in FX
Aussie dollar on one knee with Yen in demand
ECB or the EUR to Crack?

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