Article Highlights

  • U.S. trade deficit widened from $44.3B to $48.5B vs. $47B forecast
  • Canadian trade surplus grew from 0.4B CAD to 0.8B CAD
  • Canada’s Ivey PMI sank from 57.2 to 55.0 vs. 58.9 forecast
  • New Zealand GDT auction yielded 6.3% slump in dairy prices
  • U.S. IBD/TIPP Economic Optimism index down from 56.4 to 55.3
  • U.S. consumer credit dropped from $14.8B to $8.8B in January
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The Greenback is starting to feel the jitters, unable to establish a clear direction during the New York session when medium-tier reports showed a few weak spots.

Major Events:

Downbeat U.S. medium-tier reports – Even though most market participants seem to be convinced that the Fed would hike interest rates this month, weak economic reports such as the trade balance and a couple of consumer-related indicators cast doubts on these expectations.

The trade deficit widened from $44.3 billion to $48.5 billion in January, larger than the projected shortfall at $47 billion. As it turned out, this was due to a surge in imports of $5.3 billion to $240.6 billion at the start of the year, far outpacing the pickup in exports of $1.1 billion to $192.1 billion. On a year-over-year basis, exports are up 7.4% while imports are up 8.3%. Still, it’s worth noting that both components posted gains for the month, reflecting strong internal and external demand.

Meanwhile, the index of economic optimism from IBD/TIPP declined from 56.4 to 55.3 this month. Even though this reading is still above its 12-month average of 50.7, components revealed that consumers are feeling less confident about their six-month economic outlook, personal finance outlook, and confidence in federal economic policies. Lastly, U.S. consumer credit slid from $14.8 billion to $8.8 billion in January as borrowing activity retreated likely in anticipation of a Fed rate hike for the first quarter of the year.

Mixed reports from Canada – Over in the Great White North, the January trade balance printed a larger than expected surplus of 0.8 billion CAD versus the consensus at 0.2 billion CAD and the earlier 0.4 billion CAD figure. Underlying data indicated that this was a result of a record high in exports at $46.5 billion on higher volumes combined with a 0.3% dip in imports.

The Ivey PMI for February dropped from 57.2 to 55.0 to reflect a slower pace of manufacturing industry expansion instead of improving to 58.9. Components of the report showed that indices for employment and inventories picked up but that the prices index posted a significant decline from 70.1 to 61.1.

Major Market Movers:

NZD –  The Kiwi was still the weakest of the bunch, as the GDT auction showed a sharp fall in dairy prices and risk aversion also weighed on the higher-yielders.

NZD/USD slumped from .6990 to a low of .6946, NZD/JPY is down from a high of 79.76 to 79.22, EUR/NZD advanced from a low of 1.5109 to test the 1.5200 handle, and GBP/NZD is up to the 1.7500 area.

Watch Out For:

  • 11:50 pm GMT: Japanese final GDP reading (0.4% expected, 0.2% previous)
  • 11:50 pm GMT: Japanese current account balance (1.46T JPY expected, 1.66T JPY previous)
  • Tentative: Chinese trade balance (173B CNY expected, 355B CNY previous)
  • 5:00 am GMT: Japanese Economy Watchers Sentiment index

See also:

London Session Recap

Asian Session Recap

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