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Well that seemed too good to last! The dollar let go of its winnings from earlier in the week as U.S. bond yields ticked lower while risk appetite peeked back in.

The lower-yielding yen stayed supported, though, while European currencies held their ground. On the flip side, the Canadian dollar sold off sharply upon seeing weaker than expected headline and core retail sales.

  • Canadian Dec headline retail sales down by 0.8% vs. projected flat reading
  • Canada’s Dec core retail sales slipped by 1.8% vs. estimated 0.1% uptick
  • Canada’s Nov retail sales figures revised higher
  • Canadian corporate profits down 1.9% in Q4 2017 vs. earlier 8.5% increase
  • U.S. initial jobless claims at 222K vs. 230K consensus
  • U.S. EIA crude oil inventories down by 1.8M barrels vs. estimated 2.2M gain
  • New Zealand headline retail sales up 1.7% vs. 1.4% in Q4 2017
  • New Zealand core retail sales up 1.8% vs. 0.8% in Q4 2017

Major Events/Reports:

Weak Canadian retail sales

Consumer spending turned out weaker than expected in Canada for December as headline retail sales sank 0.8% while core retail sales tumbled by 1.8%. Analysts expected to see a flat reading for the former and a 0.1% uptick for the latter during the holiday shopping season.

As it turned out, significantly higher spending during the Thanksgiving sales in November was to blame for the relatively weak December readings. The previous report even enjoyed an upgrade from 0.2% to 0.3% for the headline figure and from 1.6% to 1.7% for the core reading.

Still, December sales fell in six out of 11 subsectors, led by a 5.3% drop in general merchandise spending. Ontario chalked up the largest drop in spending among the six major provinces.

Corporate profits in Canada also disappointed with a 1.9% slump in the last quarter of 2017, erasing part of the 8.5% gain seen in the previous period.

Risk appetite or just profit-taking?

Financial markets had been moving pretty much in a single direction for the earlier part of the week, so it’s no surprise that these moves are taking it easy as the weekend draws near.

Equities and commodities managed to squeeze out a few gains, with the pickup in oil partly attributed to the surprise draw of 1.8 million barrels in EIA crude oil stockpiles.

  • WTI crude oil is up to $62.77 per barrel (+1.80%)
  • Brent crude oil rose to $66.39 per barrel (+1.50%)

Meanwhile, the gains in U.S. stock indices came mostly from industrials and the energy sector.

  • Dow 30 index closed up 164.70 points to 24,962.48 (+0.66%)
  • S&P 500 index is up 2.63 points to 2,703.96 (+0.10%)
  • Nasdaq down by 8.14 points to 7,210.09 (-0.11%)

Major Market Mover(s):

CAD

The Canadian dollar failed to benefit from the crude oil rally as intermarket correlations have been breaking down and Canada’s retail sales figures disappointed.

USD/CAD popped up to a high of 1.2752 after the report was released, CAD/JPY slipped to the 84.00 handle, EUR/CAD rallied to a high of 1.5688, and GBP/CAD is up to 1.7740.

JPY

The Japanese currency continued its rampage from the previous session as it took advantage of dollar weakness and remaining market jitters.

USD/JPY slipped from 107.36 to a low of 106.59, EUR/JPY hit a low of 131.28 but managed to pull back up to 131.95 before falling back again to 131.50, AUD/JPY is down to 83.80, and NZD/JPY tumbled to 78.30.

 

Watch Out For:

  • No major reports due in the Asian session