- Dollar higher after improving labor data
- CAD outperforms after hawkish rhetoric and housing data
- Data watch
Dollar higher after improving labor data
The dollar recovered some of its recent losses today and was mostly higher against its G10 counterparts with the exception of the CAD and AUD. US economic data was mostly better with an unexpected drop in weekly jobless claims and narrowing trade deficit, however wholesale inventories surprisingly fell from the prior month. Initial jobless claims fell by 6K to 361K from the prior 367K (cons. 370K) showing a slight improvement, the June trade balance showed a deficit of -$42.9B from the previous -$48.0B (cons. -$47.5B), and wholesale inventories dropped by -0.2% in June (prior 0.0%). The improving labor data saw US treasury yields1 move higher across the curve with the 10-year yields currently up about 4.4bps to around 1.693%. U.S. equities finished the day relatively flat with the Dow Jones Industrial Average1 falling by -0.08% and the S&P 5001 edging higher by around +0.04%.
The euro is weaker across the board and EUR/USD is softer again today after being rejected from the 55-day simple moving average (SMA) and 61.8% Fib retracement which we noted earlier in the week. EU sovereign yield spreads1 are mixed and the ECB lowered its growth forecast which weighed on the common currency.
CAD outperforms after hawkish rhetoric and housing data
The Loonie was the strongest G10 currency against the USD today after housing data showed 208.5K starts in July while the June new housing price index advanced +0.2% on a monthly basis and +2.3% on the yearly change. Other data out of Canada included the trade balance which showed a widening deficit to -1.81B (prior -0.95B) on machine imports. USD/CAD remained firmly below parity after the data and as recent comments from the Bank of Canada suggest it will be the first major central bank to tighten. This is a divergence from central banks which are actively engaged in easing or have pledged to ease further if needed.
The Australian dollar is also firmer against the USD after overnight data showed an unexpected drop in the unemployment rate to 5.2% from 5.3% while the overall employment change printed at +14.0K vs. expected +10.0K. AUD/USD continues to struggle to sustain above the 1.06 figure and is beginning to show technical signs of exhaustion within its upwards trend.
Data due out of the Asia/Pacific session tonight includes Australia’s Reserve Bank Board statement on monetary policy, Japan’s final industrial production and capacity utilization for June, and New Zealand July card spending figures.
1Reference is for informational purposes only and is not offered to US clients.