The dollar is currently trading mixed against the majors, it is stronger against the commodity currencies (NZD, AUD, CAD), the GBP, and JPY while weaker against the Scandies and EUR. Deteriorating UK production data weighed on the pound and continued deflation in Switzerland initially put pressure on the franc. EUR/USD rose to its highest levels since April after breaking above the 1.33 resistance level on the back of weaker US trade data and as EU officials discussed financial problems in Cyprus. The pair is currently trading around 1.3340. The JPY remained weak after Japan announced a fiscal stimulus package of ¥10.3 trillion to increase GDP and create jobs.
Trade deficits widen in US and Canada
November trade balance figures were released in the US and in Canada moments ago and both countries posted larger than expected deficits. Canada reported a widening deficit of -1.96B from the prior -0.55B while the US trade deficit widened by 15.8% to -$48.7B (cons. -41.3B). For the US, this is the widest trade gap since April and the biggest non-oil US trade gap since 2007. This occurred as imports of consumer goods jumped to a record high. The December import price index was also released and unexpectedly fell by -0.1% m/m (cons. +0.1%) while the y/y change was a decline of -1.5% as expected.
UK production disappoints
UK November industrial and manufacturing production disappointed with yearly declines of -2.4% (cons. -1.*%) and -2.1% (cons. -1.3%) respectively. On a monthly change, industrial production grew by just 0.3% in November (cons. 0.8%) while manufacturing production unexpectedly fell by -0.3% (cons. +0.5%). The data weighed on the pound, which fell to its lowest level against the euro since April. GBP/USD is trading lower today but found near term support around the 1.61 figure. Below this, the 55- and 100-day simple moving averages (SMA’s) converge around 1.6060/65 as the next level of technical support.
Swiss deflation persists
Swiss consumer prices experienced a larger than expected drop in December with CPI showing a m/m decline of -0.2% and yearly change of -0.4%. The data underscored ongoing deflation in Switzerland and reinforced the view that monetary policy should remain very accommodative.
Philadelphia Fed President Plosser (non-voter) is scheduled to speak shortly and the NIESR UK GDP estimate for December is due at the top of the hour.