- Canadian trade surplus narrowed from 1.0B CAD to 0.9B CAD in Dec
- Canada’s building permits sank 6.6% vs. projected 3.5% drop in Dec
- Canadian Ivey PMI fell from 60.8 to 57.2 vs. 58.3 consensus
- BOE official Forbes: Economy may be on the path to a rate hike
- U.S. trade deficit narrowed from $45.7B to $44.3B in Dec
- JOLTS job openings dipped from 5.51M to 5.50M vs. 5.56M forecast
- U.S. consumer credit fell from $25.2B to $14.2B vs. $20.3B forecast
- New Zealand GDT auction yielded 1.3% gain in prices, 0.6% previous
Another mixed day for the Greenback as U.S. economic data simply came in line with expectations while the Loonie lost a lot of ground on weak reports and crude oil news.
Rate hike talk from BOE official Forbes – The Bank of England has been sitting on its hands for quite some time now so you can imagine how pound bulls reacted to a few hawkish remarks from a U.K. central bank official.
According to BOE policymaker Kristen Forbes, early reports are indicating that the pickup in inflation could be sustained and that if the economic continues to stay solid, an interest rate hike could be in the cards. For now, she admitted that monetary policy is on hold mostly due to uncertainty but reiterated that they should be quick to adapt if CPI readings continue to surprise to the upside. Forbes also had a few cautious remarks, citing that Brexit negotiations could still dampen confidence in the U.K. economy and that downside risks could return.
Downbeat data from Canada – Canadian economic reports all printed weaker than expected headline readings, suggesting that The Great White North ain’t out of the woods just yet.
Its trade surplus narrowed from 1.0 billion CAD to 0.9 billion CAD instead of widening to the projected 1.2 billion CAD figure. Components of the report revealed that this was due to a 0.8% increase in the nominal value of exports, which was mostly spurred by higher energy prices, outweighed by a 1% gain in imports on larger shipment volumes of aircraft and industrial machinery. In volume terms, exports were actually lower by 1.4% in December so external demand is still pretty shaky.
Next up, building permits sank by 6.6% in the same month, nearly twice as much as the projected 3.5% slump. This followed the 1.2% decline in November, downgraded from the initially reported 0.1% dip. Lower construction intentions for commercial buildings was the main culprit for the overall decrease in the non-residential sector while multi-family dwellings posted a record 7.9% decline.
Lastly, the Ivey PMI for January fell from 60.8 to 57.2, lower than the projected dip to 58.3 and indicative of a much slower pace of manufacturing industry growth. As it turns out, the drop in the inventories component from 54.1 to 46.1 contributed most to the slowdown even while the employment sub-index advanced from 51.7 to 53.5. The prices component also dipped from 73.8 to 70.1.
Revised EIA oil market forecasts – The U.S. Energy Information Administration updated its oil market forecasts for this year and the next, projecting an decrease in production for 2017 and no change in demand. They also estimated that U.S. oil production in 2018 will be higher by 230,000 barrels per day than initially expected but that demand will be at 330,000 barrels per day versus their earlier 370,000 barrels per day estimate.
U.S. economic reports as expected – Uncle Sam’s reports all came in line with estimates during the latest U.S. session, providing some assurance for investors that the economy can keep on keepin’ on. The trade deficit narrowed from $45.7 billion to $44.3 billion in December, slightly better than the projected $45 billion shortfall, as both imports and exports picked up to reflect healthy domestic and external demand.
The IBD/TIPP Economic Optimism index ticked higher from 55.6 to 56.4, a couple of notches above the 56.2 consensus, indicating that sentiment has improved this month and that consumers feel more confident about the economic outlook for the next six months. JOLTS job openings dipped from 5.51 million to 5.50 million instead of rising to 5.56 million, possibly as the labor market starts to absorb some slack.
Major Market Movers:
GBP – Pound bulls charged sometime in the middle of the New York session upon hearing hawkish remarks from a BOE policymaker.
GBP/USD popped up from 1.2377 to a high of 1.2547, GBP/JPY is up from 138.55 to a high of 140.63, EUR/GBP slid from .8638 to the .8550 minor psychological support, and GBP/AUD recovered back above the 1.6400 mark.
CAD – The Loonie was the big loser for the day, dragged down by weak Canadian data and lower oil demand projections for next year.
USD/CAD popped up from 1.3194 to a high of 1.3212, CAD/JPY edged slightly lower from a high of 85.43 to a low of 84.91, EUR/CAD is up from 1.4054 to a high of 1.4098, and GBP/CAD rallied to 1.6475.
- 11:50 pm GMT: Japanese current account balance
- 5:00 am GMT: Japan’s Economy Watchers Sentiment index (51.9 expected, 51.4 previous)
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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