Article Highlights

  • Canadian economy grew by 0.4% in Nov vs. 0.3% forecast
  • U.S. employment cost index up 0.5% vs. 0.6% consensus in Q4
  • Chicago PMI dropped from 54.6 to 50.3 vs. 55.1 forecast
  • U.S. CB consumer confidence down from 113.3 to 111.8 vs. 112.6 consensus
  • Trump calls out China and Japan for currency devaluation
  • New Zealand employment change up 0.8% as expected in Q4
  • New Zealand unemployment rate jumped from 4.9% to 5.2%
  • New Zealand labor cost index up 0.4% vs. 0.5% forecast
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Another day, another selloff! The Greenback ended the day in the red against its rivals once more as economic data came in mostly weaker than expected.

Major Events:

Downbeat U.S. economic data – The rosy U.S. economic picture showed some cracks in the latest New York trading session as reports printed weaker than expected results. For one, the employment cost index for Q4 fell short of estimates with a 0.5% uptick versus the projected 0.6% increase, reflecting weaker wage pressures.

Meanwhile, the Chicago PMI posted a steep drop from 54.6 to 50.3 to reflect a slower pace in industry expansion versus the estimated rise to 55.1. Components of the report revealed that a downturn in demand was to blame as the index for new orders fell 7.8 points to indicate contraction.

Lastly, the CB consumer confidence index tumbled from a downgraded 113.3 figure in December to 111.8 in January, lower than the estimated dip to 112.6. As it turns out, this decline in confidence was spurred by a less optimistic outlook for business conditions, jobs, and consumers’ income prospects.

Mixed NZ jobs data  – Just before U.S. session traders called it a night, New Zealand printed its employment figures for the last quarter of 2016. The employment change reading came in line with expectations of a 0.8% increase but the unemployment rate posted a huge surprise by jumping from 4.9% to 5.2%.

Underlying data showed that this was due to a huge increase in labor force participation as the rate rose 0.4% to 70.5% in the quarter, signaling improved confidence in job market prospects. Wage growth was also steady as the labor cost index rose 0.4%, just a notch shy of the projected 0.5% figure.

Trump Watch: Devaluation blame game – And the gloves come off! In a speech that was supposedly about pharmaceutical companies, U.S. President Trump veered off script and started rambling about how other countries, particularly China and Japan, have been using currency devaluation as a strategy to take jobs and companies away from the homeland.

“A lot of the companies have moved out, they don’t make the drugs in our country anymore. A lot of it has to do with regulation, a lot of it has to do with other countries take advantage of us with their money and their money supply and devaluation. Our country has been run so badly, we know nothing about devaluation; every other country lives on devaluation. You look at what China’s doing, you look at what Japan has done over the years, they played the money market, they played the devaluation market and we sit there like a bunch of dummies, so you have to get your companies back here,” the Donald lamented, leading forex junkies to believe that he is also jawboning the U.S. currency himself.

Major Market Movers:

USD – The scrilla was back in the losers’ bench as traders reacted to Trump’s devaluation talk, along with weaker consumer confidence and manufacturing data.

EUR/USD rose from 1.0701 to a high of 1.0813, USD/JPY slid from 113.86 to a low of 112.08, USD/CHF is down from .9958 to a low of .9861, and GBP/USD climbed from 1.2432 to test the 1.2600 handle.

Watch Out For:

  • 1:00 am GMT: Chinese official manufacturing PMI (51.2 expected, 51.4 previous)
  • 1:00 am GMT: Chinese official non-manu PMI (54.5 previous)
  • 5:30 am GMT: Australian commodity prices y/y

See also:

London Session Recap

Asian Session Recap

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