USD/CAD May Test Downtrend

* The dollar rose against the euro and yen but fell versus the Australian dollar and sterling ahead of Friday’s US employment data. US jobless and continuing claims disappointed the markets, but most other economic data showed improving economic conditions. The S&P 500 rose 8.49 points to 1,003.24, supported by better earnings from US retailers. The yen fell for the first day in four. The euro reversed earlier gains. The European Central Bank maintained its benchmark interest rate at 1.00% and signaled that it is in no hurry to tightening its monetary stance even though the central bank raised its growth and inflation forecasts. Sterling rose on economic recovery hopes. The UK services PMI rose to a near 2-year high and LIBOR rates made a new low. The Australian dollar was up, approaching the important resistance.

* The USD/CAD was little changed ahead of Friday’s US and Canadian employment data. The pair is inversely correlated with commodity prices, which have fallen lately. Political uncertainty in Canada has pressured the Canadian dollar. Liberal Party leader Michael Ignatieff signaled this week that he plans to stop supporting the Conservative minority government. The threat of intervention also supports the pair. The USD/CAD has support levels in the 1.08 and 1.06 areas and resistances in the 1.11 from the downtrend line. A penetration of the downtrend would indicate a turnaround in the USD/CAD.



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Financial and Economic News and Comments

US & Canada

* US initial jobless claims in the week ending August 29 declined 4,000 to a higher-than-expected 570,000 from the previous week’s upwardly revised 574,000, figures from the Labor Department showed. The 4-week moving average of new jobless claims increased 4,000 to 571,250, the highest level in more than a month. Continuing jobless claims in the week ending August 22 rose 92,000 to 6,234,000 from the preceding week’s upwardly revised 6,142,000. The 4-week moving average of those continuing claims fell 27,250 to 6,216,750. The insured unemployment rate for the week ending August 22 increased to 4.7% from the prior week’s 4.6%. Overall, the figures indicate US labor market conditions remain difficult even as the economy is recovering.

* The ISM US non-manufacturing index rose to 48.4 in August from 46.4 in July, indicating US service industries contracted at the slowest pace in 11 months, data from the Institute for Supply Management showed, adding to US economic recovery signs. The index’ major components mostly increased in August. The measures for new orders and employment in August climbed to their highest levels since September 2008; the new orders index, approaching the 50 expansion mark, rose to 49.9 in August from 48.1 in July, and the employment index increased to 43.5 from 41.5. The prices paid index rose to 63.1 in August from 41.3 in July, a record one-month rise.

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Europe

* The Markit econozone composite PMI was upwardly revised to 50.4 for August from an initially reported 50.0, up from 47.0 in July, indicating overall expansion for both manufacturing and service industries in the euro area and ending a 14-month string of readings below the 50 expansion mark, final August PMI data from Markit Economics showed. The services PMI was upwardly revised to 49.9 for August, the highest level since May 2008, from a previously reported 49.5, up from 45.7 in July. The manufacturing PMI improved to 48.2, the highest level since June 2008, from July’s 46.3.

* Eurozone retail sale unexpectedly declined 0.2% m/m in July after being unchanged m/m in June, according to data released by Eurostat. July retail sales fell a less-than-expected 1.8% y/y, following June’s revised 2.0% y/y decrease.

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* The Markit German services PMI was revised down slightly to 53.8 for August from a previously reported 54.1, indicating an expansion in Germany’s services sector, following July’s contraction-level 48.1, according to final August PMI figures by Markit Economics.

* The CIPS/Markit UK services PMI rose slightly more than expected to 54.1 in August from 53.2 in July, indicating the UK services sector expanded for a fourth consecutive month and at the fastest pace since September 2007, data from the Chartered Institute of Purchasing and Supply and Markit Economics showed, adding to signs of a UK economic recovery.

* The European Central Bank kept its key interest rate unchanged at 1.00%, as forecast. ECB President Jean- Claude Trichet, while acknowledging that “the significant contraction in economic activity has come to an end,” said a eurozone economic recovery will be “uneven” and “bumpy” and signaled the ECB is in no rush to exit emergency stimulus measures. “Uncertainty is very high,” Trichet said. “It’s a bumpy road we have ahead of us. Prudence and caution are still of the essence.”

Asia-Pacific

* The Australian Industry Group - Commonwealth Bank performance of services index increased to 48.0 in August from 44.1 in July, indicating the rate of contraction in Australia’s services sector moderated last month, following June’s expansion-level 50.2, the AiG and Commonwealth Bank of Australia reported. New orders improved in August, with the new orders index increasing to 47.1 from July’s 45.7. The employment index rose to 48.6 in August, indicating decline in services sector employment eased to its slowest pace in 14 months, following 45.4 in July.

* Australia’s seasonally adjusted trade deficit swelled more than expected to A$1.556 billion ($1.3 billion) in July from a revised A$538 million in June, figures from the Australian Bureau of Statistics showed. Exports declined 1% to A$20.041 billion in July. Imports rose 4% to A$21.598 billion, the largest rise since October 2008. Oil imports jumped 21% and consumption goods increased 2%.

FX Strategy Update



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Источник: Hans Nilsson

04.09.2009