Click here for PDF version

NZDUSD<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Further momentum from previous bearishness continued in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York session, with dollar strength derived from evidence of consumer support.  According to both personal income and spending figures in the morning, consumers remain well supportive of the current economy, even though the strength may be slightly less than expected.  For the month of August, personal spending came in slightly less than the consensus figure rising by only 0.1 percent compared to a consensus 0.2 percent expected.  However, in the longer term, the most recent report is far less than the 0.8 percent rise seen in the previous month, indicative that the economy needs more than lower energy prices to boost consumption habits.  Income subsequently rose in line with estimates, at a 0.3 percent monthly pace.  Both reports were coupled with higher consumer confidence released by the University of Michigan as manufacturing purchasing activity was bolstered in the Chicago area.  Expected to decline to a 55.7 reading, the report jumped higher to 62.1, lifted by new orders and record inventory figures.  However, some weakness could be seen in the report as the employment and prices paid component both dipped.  Likely to keep any further rate hikes speculation from boosting the dollar, traders are seemingly confident in the worlds largest economy which is keeping the dollar rather mixed against the majors.

Against the Kiwi, dollar proponents boosted bids as building permits for the Pacific economy rose less than expected.  Increasing by 3.6 percent, the pace at which housing is growing was far less than the 15.1 percent seen in the month of July.  Likely attributed to higher interest rates, consumer figures may be on the decline as a whole as individuals become aware of thinning expansion in the country.

USDCAD

Rising mostly on relatively positive dollar fundamentals, the USDCAD major pair showed some weakness in the Canadian major leg following an in line gross domestic product figure.  Expected to rise by 0.2 percent, the actual increase was above the previous unchanged figure that roiled markets last month.  Subsequent to the zero percent change in the worlds ninth largest economy, the Canadian major lost against the greenback taking out technical levels above to towards the 1.1300 figure.  This time around, the data was softer than US data, prompting the slightly sell off in the underlying currency.  Weakness in crude oil didnt help either as the contract settled incrementally changed from yesterdays settlement, just below $63 a barrel at $62.90.  Overall, however, the days lift looks like a simple pullback on the previous six session decline from the 1.1250 technical break as further momentum to the downside is likely in the pair as speculation is likely to boost the crude contract higher.  Earlier in the week, a decision to cut production by OPEC member is fueling the current rise from the formidable $60 support figure.

With expectations of higher crude oil, Canadian dollar strength may return in next weeks action.  However, any economic fundamentals will be limited to a handful of data including manufacturing activity and employment figures.

EURCAD

European data propelled the major leg against a flailing Canadian dollar during the North American session.  With French consumer confidence higher and producer prices on the inflationary side, there was plenty of hope for Euro bulls as previous speculation had pared back slightly on less than perfect hawkish data.  Additionally supporting the notion of higher growth in the Eurozone were positive results from the overall surveys released in the overnight.  Industrial confidence remained sustained at the 1.46 print versus the previous 2 while consumer confidence rebounded into positive territory, rising to 4 from a negative 8 reading in the month of August. 

Subsequently, German retail sales were higher on the annualized comparison by 1 percent versus the -0.3 percent witnessed in the month prior.  Attributed to the lift was a cut in energy prices for the month, spurring more consumer demand.  However, the lower prices in commodities contributed to a lower consumer prices index for the month, concerning rate hawks in the short term.  Expected to remain above the 2 percent benchmark target set by the European Central Bank, consumer prices dipped to 1.8 percent on the annualized figure.  Now with prices lower than expected by the central bank, fear is rising that the current sentiment of higher rates will be jeopardized as ECB President Trichet may grow comfortable with the current pace of prices.  Nonetheless, there still exists a higher degree of probability that rates will continue to be tightened in the longer term for the Euro as opposed to the current pullback in the Canadian economy.