FXS: The Canadian Dollar was rocked by poor retail sales data
Bits of roof are falling in one of the Commonwealth Games Stadiums in Delhi. It has an ominous ‘sky falling down’ ‘chicken licken’ feeling to it as more and more athletes decide whether to risk it and travel to India. It must be a bit like planning your holiday all year only to be told a fortnight before you fly that the hotel isn’t quite finished. Do you go anyway and hope for the best or call it off and make an insurance claim?
The US Dollar looks like the sky is falling on it at the moment as the threat of further monetary expansion has caused a rash of USD selling. The Dollar reached its weakest level against the Euro in 5 months. It appears that it is feared that today’s US housing data could be very poor and that would be another thorn in the US Dollar’s side. Existing home sales have been weak for a couple of years and even now, as the US economy is showing glimmers of recovery, the figures are very poor. Traders are also wary of tomorrow’s durable goods data which could be equally troubling. Poor data raises fears that the Federal Reserve will follow through on its promise to print more money and that weakens the USD.
For its part, the Euro was given a fillip by the words of the Greek Prime Minister who delivered a very upbeat view of the prospects for Greece’s recovery. George Papandreou poured scorn on the potential for Greece defaulting on debt and some traders took heart from that news. He cited the success of yesterday’s bond auction as evidence that the markets are gaining confidence in the potential for a proper Greek recovery. It’s good to be confident but Greece is still a long way from exiting of the woods. Even the poor manufacturing orders data failed to dampen enthusiasm for the Euro which is enjoying being second option for safe haven buyers after the beleaguered US Dollar.
Sterling had a very bad day at the office. The Bank of England minutes showed the expected mix of 8 committee members voting for status quo on interest rates while Andrew Sentence called for a pre-emptive hike but that wasn’t what weakened the Pound. The Monetary Policy Committee, like the Federal Reserve, has shifted towards suggesting further fiscal stimulus is likely and that had the same effect on Sterling as the Fed’s comments had on the US Dollar. One member tried to decry the view that the BOE had gone soft on inflation but the evidence of years of above target inflation and little evidence of measures to control it are hard to argue against. Weakness across the board has pulled the Pound 6 cents lower against the Euro than it was just a week ago but it still managed to make minor gains against the US Dollar.
The Canadian Dollar was rocked by poor retail sales data; a drop of 0.1% in July’s sales was unexpected and the Canadian Dollar which had been gaining a little on stronger commodity prices, slipped on the news. Many have commented that Canadian data has started to disappoint the markets and the CAD has slipped on most new releases this week even as the overall mood has been quite positive for the Canadian economy.
Elsewhere, the markets had been expecting the New Zealand economy to grow more than 1% in quarter 2 but the actual figure released last night was just 0.2%. The writing was on the wall after the current account dropped into deficit as we saw in the previous day’s data release but traders were still apparently caught offside by the news of the dire growth data and the NZ Dollar has been sold off overnight. Whether that is the start of a trend is open to debate but it certainly is possible. Japan as on holiday today so the overnight volumes will have been slim; things could change when Europe kicks in.
That’s about it for today but there are a few other choice stories in the news. My favourite of the day is about a team of scientists in San Diego who have developed underpants which check your heart rate and blood pressure and may, in the future, be able to tell you when to take medication. They also claim the pants will tell you when they need changing. If every day isn’t good enough for the noble scientists, I wonder whether they perhaps need to study the shower and laundry room as well.
